Question 1

A negotiable instrument:

Accepted Answer

A)  requires a fixed amount of money 
B)  must be in writing 
C)  is payable on demand or in the future 
D)  All of the choices are correct. 
A)  requires a fixed amount of money 
B)  must be in writing 
C)  is payable on demand or in the future 
D)  All of the choices are correct. D

Question 2

Selling a loan that is a negotiable instrument, such as a promissory note, offers:

Accepted Answer

A)  liquidity 
B)  encourages lending 
C)  provides an investment opportunity for the purchaser 
D)  All of the choices are correct. 
A)  liquidity 
B)  encourages lending 
C)  provides an investment opportunity for the purchaser 
D)  All of the choices are correct. D

Question 3

Name and describe the elements of a negotiable instrument.

Accepted Answer

A negotiable instrument is: an unconditional promise or order; to pay a fixed amount of money; that must be in writing; signed; made payable "to order," "to bearer," or "to cash;" and made payable either on demand or at a definite time in the future.

Question 4

In Danco, Inc. v. Commerce Bank/Shore, 675 A.2d 663 (N.J. Super. Ct. App. Div. 1996), the court held that:

Accepted Answer

A)  the indorsements of Danco were not required on the checks in question 
B)  the promises of Danco were not required on the checks in question 
C)  the indorsements of Commerce Bank were not required on the checks in question 
D)  the promises of Commerce Bank were not required on the checks in question 
A)  the indorsements of Danco were not required on the checks in question 
B)  the promises of Danco were not required on the checks in question 
C)  the indorsements of Commerce Bank were not required on the checks in question 
D)  the promises of Commerce Bank were not required on the checks in question

Question 5

A negotiable instrument must be in writing.

Accepted Answer

A) True 
 B)False

Question 6

Sally promised to pay Samuel via a written document which stated "I promise to pay Samuel Williams $5000 on July 29, 2020." What type of negotiable instrument was created? Why?

Accepted Answer

A promissory note has been created here

Question 7

Jenny owes Jamie $100 to repay a short-term loan they agreed to one evening at a restaurant. They signed this agreement on a bar napkin. Jamie owes Johnny $100 for babysitting services. Jamie can order Jenny to pay Johnny because it is

Accepted Answer

A)  an implied warranty 
B)  an express warranty 
C)  a negotiable instrument 
D)  a warranty of fitness for a particular purpose 
A)  an implied warranty 
B)  an express warranty 
C)  a negotiable instrument 
D)  a warranty of fitness for a particular purpose

Question 8

A __________ consists solely of the indorser's signature and nothing else.

Accepted Answer

A)  special indorsement 
B)  blank indorsement 
C)  fixed indorsement 
D)  None of the choices are correct. 
A)  special indorsement 
B)  blank indorsement 
C)  fixed indorsement 
D)  None of the choices are correct.

Question 9

To be payable on demand, an instrument must either state that it is payable on demand or __________ the date altogether.

Accepted Answer

A)  imply 
B)  omit 
C)  include 
D)  None of the choices are correct. 
A)  imply 
B)  omit 
C)  include 
D)  None of the choices are correct.

Question 10

If an instrument is __________ and thus payable to an identified person, its negotiation requires that the identified party physically transfer the instrument and indorse the instrument to its new holder.

Accepted Answer

A)  implied paper 
B)  bearer paper 
C)  order paper 
D)  All of the choices are correct. 
A)  implied paper 
B)  bearer paper 
C)  order paper 
D)  All of the choices are correct.

Question 11

Negotiable instruments serve two vital commercial purposes:

Accepted Answer

A)  an express warranty and personal services 
B)  an express and an implied warranty 
C)  a substitute for money and an implied warranty of fitness for a particular purpose 
D)  a substitute for money and financing 
A)  an express warranty and personal services 
B)  an express and an implied warranty 
C)  a substitute for money and an implied warranty of fitness for a particular purpose 
D)  a substitute for money and financing

Question 12

A promissory note creates a promise to repay involving two parties: __________.

Accepted Answer

A)  the first party and the second party 
B)  the maker and the payee 
C)  the maker and the makee 
D)  None of the choices are correct. 
A)  the first party and the second party 
B)  the maker and the payee 
C)  the maker and the makee 
D)  None of the choices are correct.

Question 13

A __________ is one that seeks to limit the negotiability of an instrument or impose a condition on the payee.

Accepted Answer

A)  non-restrictive indorsement 
B)  horizontal indorsement 
C)  lateral indorsement 
D)  restrictive indorsement 
A)  non-restrictive indorsement 
B)  horizontal indorsement 
C)  lateral indorsement 
D)  restrictive indorsement

Question 14

Brian owes Frederick $500 for a past debt owed. Ethan owes Brian $500 for a down payment on a vehicle. Ethan writes on the back of the promissory note: "Pay to Brian," Does Brian have the ability to present the note to Frederick for payment?

Accepted Answer

A special indorsement specifically ident

Question 15

The UCC defines a __________ as a written undertaking to pay money signed by the party undertaking to pay:

Accepted Answer

A)  offer 
B)  promise 
C)  common law contract 
D)  gift 
A)  offer 
B)  promise 
C)  common law contract 
D)  gift

Question 16

In Smith v. Vaughn, 174 Ohio App. 3d 473, the court held that the phrase to pay "when you can" created:

Accepted Answer

A)  an implied warranty 
B)  a negotiable instrument 
C)  a promissory note 
D)  All of the choices are correct. 
A)  an implied warranty 
B)  a negotiable instrument 
C)  a promissory note 
D)  All of the choices are correct.

Question 17

A __________ lacks any type of language that seeks to limit the negotiability of an instrument or conditions to its payment or transfer.

Accepted Answer

A)  non-restrictive indorsement 
B)  horizontal indorsement 
C)  lateral indorsement 
D)  restrictive indorsement 
A)  non-restrictive indorsement 
B)  horizontal indorsement 
C)  lateral indorsement 
D)  restrictive indorsement

Question 18

A certificate of deposit is a written note that indicates a bank has received money as a loan and promises to repay the amount in the future with interest, typically at a higher rate than that offered by a savings account.

Accepted Answer

A) True 
 B)False

Question 19

Various types of __________ undergo securitization.

Accepted Answer

A)  debts 
B)  warranties 
C)  documents 
D)  contracts 
A)  debts 
B)  warranties 
C)  documents 
D)  contracts

Question 20

A negotiable instrument can be an unconditional promise to repay or it can be __________.

Accepted Answer

A)  merchantable 
B)  express 
C)  puffery 
D)  an order 
A)  merchantable 
B)  express 
C)  puffery 
D)  an order

Exam 19: Definition, Creation, and Categories of Negotiable Instruments

A negotiable instrument:

Selling a loan that is a negotiable instrument, such as a promissory note, offers:

Name and describe the elements of a negotiable instrument.

In Danco, Inc. v. Commerce Bank/Shore, 675 A.2d 663 (N.J. Super. Ct. App. Div. 1996), the court held that:

A negotiable instrument must be in writing.

Sally promised to pay Samuel via a written document which stated "I promise to pay Samuel Williams $5000 on July 29, 2020." What type of negotiable instrument was created? Why?

Jenny owes Jamie $100 to repay a short-term loan they agreed to one evening at a restaurant. They signed this agreement on a bar napkin. Jamie owes Johnny $100 for babysitting services. Jamie can order Jenny to pay Johnny because it is

A __________ consists solely of the indorser's signature and nothing else.

To be payable on demand, an instrument must either state that it is payable on demand or __________ the date altogether.

If an instrument is __________ and thus payable to an identified person, its negotiation requires that the identified party physically transfer the instrument and indorse the instrument to its new holder.

Negotiable instruments serve two vital commercial purposes:

A promissory note creates a promise to repay involving two parties: __________.

A __________ is one that seeks to limit the negotiability of an instrument or impose a condition on the payee.

Brian owes Frederick $500 for a past debt owed. Ethan owes Brian $500 for a down payment on a vehicle. Ethan writes on the back of the promissory note: "Pay to Brian," Does Brian have the ability to present the note to Frederick for payment?

The UCC defines a __________ as a written undertaking to pay money signed by the party undertaking to pay:

In Smith v. Vaughn, 174 Ohio App. 3d 473, the court held that the phrase to pay "when you can" created:

A __________ lacks any type of language that seeks to limit the negotiability of an instrument or conditions to its payment or transfer.

A certificate of deposit is a written note that indicates a bank has received money as a loan and promises to repay the amount in the future with interest, typically at a higher rate than that offered by a savings account.

Various types of __________ undergo securitization.

A negotiable instrument can be an unconditional promise to repay or it can be __________.

Legal Foundations and Thinking Strategically

Business, Societal, and Ethical Contexts of Law

Business and the Constitution

The American Judicial System, Jurisdiction, and Venue

Resolving Disputes: Litigation and Alternative Dispute Resolution

Contracts: Overview, Definition, Categories, and Source of Law

Mutual Assent: Agreement and Consideration

Capacity and Legality

Enforceability

Performance

Breach and Remedies

Contracts for the Sale of Goods: Overview of Article 2

Sales Contracts: Agreement, Consideration, and the Statute of Frauds

Title, Allocation of Risk, and Insurable Interest

Performance and Cure in Sales Contracts

Breach and Remedies in a Sales Transaction

UCC Article 2A: Lease Contracts

Sales Warranties

Negotiation, Endorsements, and Holder in Due Course

Liability, Defenses, and Discharge

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Secured Transactions

Creditors Rights

Alternatives for Insolvent Borrowers

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Choice of Business Entity and Sole Proprietorships

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Overview of the Securities Market: Definition, Categories, and Regulation

Regulation of Issuance: The Securities Act of 1933

Regulation of Trading: The Securities Exchange Act of 1934

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Duties and Liabilities of Principals and Agents

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