Exam 27: Online: Special Contracts: Negotiable Instruments

Analee bought a widget from Nathan.On March 1, she paid the purchase price by giving him a promissory note for $100 000.The entire payment is due on June 1, but the note contains an acceleration clause.That means that Nathan has the absolute right to receive payment before June 1 if he wants.

After buying a yacht for $1 200 000 using a cheque, Kyle has returned to the yacht dealership to demand a refund of $200 000 on the basis that he is not satisfied with the boat.Kyle argues that the yacht is really only worth $1 000 000 and that his liability on the cheque consequently was limited to that amount.Which of the following requirements of using a negotiable instrument did Kyle fail to consider?

Natalia has a chequing account at the Bank of Victoria.It contains a balance of $3000.Natalia bought a scooter from Edgar for $1000.He wants to have a cheque in bearer form.That desire can be achieved if

Krystyne bought a widget from Ryan.As payment, she gave him a cheque for $10 000 that was drawn on her account at the Bank of Windsor.Because she discovered that the widget was defective, Krystyne countermanded her cheque before Ryan presented it for payment.Due to a clerical error, the bank nevertheless honoured the cheque and paid $10 000 to Ryan.Is the bank entitled to debit Krystyne's account? Do you have enough information to answer that question?

Francine bought a widget from Simon.In payment of the purchase price, she gave him a cheque for $10 000 drawn on her account at the Bank of Waterloo.Because Francine's account was overdrawn, the bank dishonoured the cheque when Simon presented it for payment.Identify two grounds upon which Simon can sue Francine.Briefly explain which option is easier.

Kelly drew a cheque for $10 000 on her account at the Bank of Sudbury.She used that cheque to buy a widget from Joe.Joe presented the cheque to the Bank of Sudbury and received $10 000 in cash.The bank now realizes that it made a mistake because the balance in Kelly's account was never more than $2000.The bank therefore is entitled to recover from Joe the money that it paid to him by mistake.

What is the difference between a demand draft, a sight draft, and a time draft?

Which of the following statements is TRUE with respect to promissory notes?

The provisions in the Bills of Exchange Act dealing with consumer notes and bills can apply to a promissory note or to a bill of exchange, but not to a cheque because a cheque is never used for credit purposes.

Bronwyn Hogg received a cheque.She endorsed in blank.At the same time, her sister, Gwyneth, wrote her own signature and the following words on the back of the cheque: "Guarantor for B Hogg." The cheque now contains both a general endorsement and an accommodation endorsement.

Which of the following statements is TRUE with respect to certification of cheques?

Fenna created a promissory note for $10 000 that was payable to the order of Mark.She delivered that instrument to him.Mark is indebted to Muriel for $10 000.He wants to discharge that debt by allowing Muriel to receive payment under the note that Fenna created.Muriel is unsure whether Fenna or Mark would be capable of actually paying $10 000 if asked to do so.However, Muriel is confident that Mark's brother, Cameron, is capable of paying $10 000.Which of the following statements is TRUE?

Dina drew a cheque on her account at the Bank of Brockville and named Gary as the payee.What process could be used to make the cheque into "something equivalent to money"? Explain the nature and effect of that process.

Ferdinand bought a boat from Isabelle.The price was $100 000.She required payment to be made by way of a cheque.Which of the following statements is TRUE?

Which of the following defences may be either a defect in title defence or a real defence, depending upon the circumstances?

A person can be considered to be a holder in due course even though they did not give consideration for the instrument.

Grant wanted to sue a car dealership for breach of contract.Carolyn agreed to work as his lawyer.To ensure that he eventually paid his bill, Carolyn required grant to sign a document in which he promised to pay her "$10 000 on December 31 if the court holds the car dealership liable for damages." That document is a promissory note that is governed by the Bills of Exchange Act.

A negotiable instrument is a special type of contract.It differs from a regular contract because a negotiable instrument is enforceable

Identify and briefly explain three major differences between a negotiable instrument and a regular contract.

Briefly compare and contrast a postdated cheque and a staledated cheque.Can a cheque ever become both postdated and staledated?