Question 1

An "X" or a thumbprint could constitute a signature within the meaning of the term in the Code.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

A draft involves three parties: a drawer, a drawee, and a payee.

Accepted Answer

A) True 
 B)False

Question 4

Negotiability invests negotiable instruments with a high degree of marketability and commercial utility by allowing them to be freely transferable and enforceable by a person with the rights of a holder in due course against a person obligated on the instrument.

Accepted Answer

A) True 
 B)False

Question 5

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

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 Redtyn is a business entity. 
D)  Yes, because it meets all the requirements of negotiability. 
A)  No, because the promise refers to another contract. 
B)  No, because its payment is limited to a particular fund. 
C)  Yes, because Redtyn is a business entity. 
D)  Yes, because it meets all the requirements of negotiability.

Question 6

In the development of the law of negotiable instruments, which of the following was not a step?

Accepted Answer

A)  Centuries ago, contract rights to the payment of money were not assignable because the contractual promise ran to the promisee. 
B)  Contractual rights became assignable to third parties. 
C)  The law of assignments changed to permit assignees to obtain greater rights than their assignors. 
D)  The concept of a holder in due course developed, which allowed certain good faith transferees who gave value to acquire the right to be paid, free of most of the defenses to which an assignee would be subject. 
A)  Centuries ago, contract rights to the payment of money were not assignable because the contractual promise ran to the promisee. 
B)  Contractual rights became assignable to third parties. 
C)  The law of assignments changed to permit assignees to obtain greater rights than their assignors. 
D)  The concept of a holder in due course developed, which allowed certain good faith transferees who gave value to acquire the right to be paid, free of most of the defenses to which an assignee would be subject.

Question 7

A cashier's check is a check drawn by a bank upon itself to the order of a named payee.

Accepted Answer

A) True 
 B)False

Question 8

The Revised Article 3 of the UCC provides that a check which meets all requirements of being a negotiable instrument, except that it is not payable to bearer or order, is nevertheless a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 9

Identify which of the following meet the Article 3 negotiability requirement of being payable at a definite time: (a) A note payable "on or before June 14, 2014." (b) A dated instrument payable "30 days after date." (c) An undated instrument payable "30 days after date." (d) An instrument payable "when Baxter is promoted to plant manager." (e) A note payable on December 31, subject to acceleration by the holder." (f) A note granting the holder the option to extend maturity of the instrument for an indefinite period.

Accepted Answer

Illustrations (a), (b), (e), and (f) are

Question 10

References to other agreements in negotiable instruments:

Accepted Answer

A)  destroy negotiability unless the recital makes the instrument subject to, or governed by, the terms of another agreement. 
B)  do not destroy negotiability in any circumstances. 
C)  do not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement. 
D)  None of these. 
A)  destroy negotiability unless the recital makes the instrument subject to, or governed by, the terms of another agreement. 
B)  do not destroy negotiability in any circumstances. 
C)  do not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement. 
D)  None of these.

Question 11

All but which one of the following is required of a negotiable instrument?

Accepted Answer

A)  It must be payable only out of a particular fund. 
B)  It must contain an unconditional promise or order to pay a fixed amount in money. 
C)  It must be payable on demand or at a definite future date. 
D)  It must be in writing and signed by the maker or drawer. 
A)  It must be payable only out of a particular fund. 
B)  It must contain an unconditional promise or order to pay a fixed amount in money. 
C)  It must be payable on demand or at a definite future date. 
D)  It must be in writing and signed by the maker or drawer.

Question 12

Negotiability is wholly a matter of form.

Accepted Answer

A) True 
 B)False

Question 13

A draft is payable "to the order of Joe Jones or to bearer." Sally finds it and demands payment. Should the drawer pay Sally?

Accepted Answer

A)  No, unless Joe Jones's name is crossed off. 
B)  No, unless "bearer" is handwritten. 
C)  Yes, since the word "or" is contained in the instrument, either Joe Jones or the bearer of the draft may obtain payment. 
D)  No, the terminology is ambiguous and therefore the draft must be paid only to the order of Joe Jones. 
A)  No, unless Joe Jones's name is crossed off. 
B)  No, unless "bearer" is handwritten. 
C)  Yes, since the word "or" is contained in the instrument, either Joe Jones or the bearer of the draft may obtain payment. 
D)  No, the terminology is ambiguous and therefore the draft must be paid only to the order of Joe Jones.

Question 14

An authorization to confess judgment on the instrument destroys its negotiability.

Accepted Answer

A) True 
 B)False

Question 15

A promise or order is unconditional unless it states that:

Accepted Answer

A)  there is an express condition to payment. 
B)  the promise or order is subject to or governed by another writing. 
C)  rights or obligations concerning the order or promise are stated in another writing. 
D)  All of these. 
A)  there is an express condition to payment. 
B)  the promise or order is subject to or governed by another writing. 
C)  rights or obligations concerning the order or promise are stated in another writing. 
D)  All of these.

Question 16

A check is a draft payable on demand.

Accepted Answer

A) True 
 B)False

Question 17

To be negotiable, an instrument must be in writing.

Accepted Answer

A) True 
 B)False

Question 18

An assignee of contractual rights acquires only the same rights as the assignor.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a negotiable instrument?

Accepted Answer

A)  A check. 
B)  A draft. 
C)  A certificate of deposit. 
D)  A stock certificate. 
A)  A check. 
B)  A draft. 
C)  A certificate of deposit. 
D)  A stock certificate.

Question 20

Negotiable instruments:

Accepted Answer

A)  include drafts, promissory notes, assignments, and certificates of deposit. 
B)  are used primarily for smaller transactions. 
C)  in the form of checks have decreased in use since 2000. 
D)  have increased in usage to the point where they are now approximately equal to usage of cash for payments. 
A)  include drafts, promissory notes, assignments, and certificates of deposit. 
B)  are used primarily for smaller transactions. 
C)  in the form of checks have decreased in use since 2000. 
D)  have increased in usage to the point where they are now approximately equal to usage of cash for payments.

Exam 24: Form and Content

An "X" or a thumbprint could constitute a signature within the meaning of the term in the Code.

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

A draft involves three parties: a drawer, a drawee, and a payee.

Negotiability invests negotiable instruments with a high degree of marketability and commercial utility by allowing them to be freely transferable and enforceable by a person with the rights of a holder in due course against a person obligated on the instrument.

In the development of the law of negotiable instruments, which of the following was not a step?

A cashier's check is a check drawn by a bank upon itself to the order of a named payee.

The Revised Article 3 of the UCC provides that a check which meets all requirements of being a negotiable instrument, except that it is not payable to bearer or order, is nevertheless a negotiable instrument.

References to other agreements in negotiable instruments:

All but which one of the following is required of a negotiable instrument?

Negotiability is wholly a matter of form.

A draft is payable "to the order of Joe Jones or to bearer." Sally finds it and demands payment. Should the drawer pay Sally?

An authorization to confess judgment on the instrument destroys its negotiability.

A promise or order is unconditional unless it states that:

A check is a draft payable on demand.

To be negotiable, an instrument must be in writing.

An assignee of contractual rights acquires only the same rights as the assignor.

Which of the following is not a negotiable instrument?

Negotiable instruments:

Introduction to Law

Business Ethics

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

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

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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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