Question 1

Which of the following types of endorsements can you place upon a negotiable instrument without creating any risk of liability for yourself?

Accepted Answer

A) identifying endorsement and qualified endorsement 
B) identifying endorsement 
C) a restrictive endorsement but not a special endorsement 
D) accommodation endorsement and restrictive endorsement 
E) accommodation endorsement and identifying endorsement 
A) identifying endorsement and qualified endorsement 
B) identifying endorsement 
C) a restrictive endorsement but not a special endorsement 
D) accommodation endorsement and restrictive endorsement 
E) accommodation endorsement and identifying endorsement

Question 2

Which of the following statements is TRUE with respect to negotiable instruments?

Accepted Answer

A) Technically speaking, there are only three types of negotiable instruments: cheques, bills of exchange, and promissory notes. 
B) The Bills of Exchange Act applies to every type of negotiable instrument. 
C) Unlike most contracts, a negotiable instrument is effective only if it is written and signed. 
D) A negotiable instrument is valid as long as it provides a mechanism that the drawer can use to determine how much the payee is entitled to receive. 
E) A negotiable instrument is effective only if it contains a conditional obligation to pay money. 
A) Technically speaking, there are only three types of negotiable instruments: cheques, bills of exchange, and promissory notes. 
B) The Bills of Exchange Act applies to every type of negotiable instrument. 
C) Unlike most contracts, a negotiable instrument is effective only if it is written and signed. 
D) A negotiable instrument is valid as long as it provides a mechanism that the drawer can use to determine how much the payee is entitled to receive. 
E) A negotiable instrument is effective only if it contains a conditional obligation to pay money.

Question 3

Chris fraudulently induced Lucianna into drawing a cheque for $10 000.Chris then negotiated the cheque to Kenneth, who is a holder in due course.Is Kenneth entitled to receive payment on the cheque? Do you need any more information before answering that question? Explain your answer.

Accepted Answer

Depending upon the circumstances, fraud

Question 4

Alexandra bought a snow blower from Rajeev.The price was $5000.As payment, she gave him a document entitled "Promissory Note" that contained her unconditional promise to pay $5000 to him "when the snow next falls." Even though that document does not satisfy the requirements of the Bills of Exchange Act, Rajeev is still entitled to receive $5000 from Alexandra if the condition is met.

Accepted Answer

A) True 
 B)False

Question 5

Assume that today is March 1.On February 1, Patricia bought a guitar from Metheny's Music Shop.The price was $2500.She gave the store a cheque for that amount that was dated June 1.Which of the following statements is now TRUE?

Accepted Answer

A) The cheque is invalid because it is postdated. 
B) If the store presents the cheque for payment on October 1, the drawee will probably refuse to honour the instrument on the ground that it is staledated. 
C) Metheny's Music Shop must present the cheque to the drawee for payment on or before June 1. 
D) Because the cheque is dated five months after it was created, it is considered overdrawn. 
E) Patricia has created a postdated cheque that cannot be honoured before June1. 
A) The cheque is invalid because it is postdated. 
B) If the store presents the cheque for payment on October 1, the drawee will probably refuse to honour the instrument on the ground that it is staledated. 
C) Metheny's Music Shop must present the cheque to the drawee for payment on or before June 1. 
D) Because the cheque is dated five months after it was created, it is considered overdrawn. 
E) Patricia has created a postdated cheque that cannot be honoured before June1.

Question 6

A sight draft allows the payee of a bill of exchange to receive payment immediately, whereas a demand draft only allows the payee to require the drawee to make payment within three days of presentation.

Accepted Answer

A) True 
 B)False

Question 7

Shoshanna drafted a complete cheque and made it payable to bearer.She placed it in her desk drawer.She intended to give it as a prize to whichever student achieved the highest grade in her business law class.The cheque, however, was stolen before Shoshanna could do so.After passing through several hands, it came into Ethan's possession.Which of the following statements is TRUE?

Accepted Answer

A) Ethan can enforce the cheque against Shoshanna if he is a holder. 
B) Ethan can enforce the cheque against Shoshanna if he is a holder in due course and there is no real defense. 
C) Shoshanna merely has a personal defence as a result of the theft. 
D) Shoshanna has a real defence as a result of the theft. 
E) Ethan can enforce the cheque against Shoshanna because he has possession of the cheque and therefore is considered an immediate party. 
A) Ethan can enforce the cheque against Shoshanna if he is a holder. 
B) Ethan can enforce the cheque against Shoshanna if he is a holder in due course and there is no real defense. 
C) Shoshanna merely has a personal defence as a result of the theft. 
D) Shoshanna has a real defence as a result of the theft. 
E) Ethan can enforce the cheque against Shoshanna because he has possession of the cheque and therefore is considered an immediate party.

Question 8

On May 1, Emile bought a widget from Megan.The price was $15 000.On June 1, Emile paid that price by giving Megan a bill of exchange that was drawn on the Bank of Swift Current.The bill was stated to be payable "on demand." Which of the following statements is TRUE?

Accepted Answer

A) Because the bill is payable on sight, Megan cannot present it to the Bank of Swift Current for acceptance 
B) If Megan presents the bill to the Bank of Swift Current on July 1, she is entitled to receive $15 000 immediately. 
C) The bill is invalid because while a promissory note can be payable on sight, a bill cannot. 
D) Unlike certification of a cheque, acceptance of a bill would not create rights that Megan could use against the Bank of Swift Current. 
E) The reason that the bill is considered to be payable "on sight" is that it was created some time after Emile and Megan created their sales contract. 
A) Because the bill is payable on sight, Megan cannot present it to the Bank of Swift Current for acceptance 
B) If Megan presents the bill to the Bank of Swift Current on July 1, she is entitled to receive $15 000 immediately. 
C) The bill is invalid because while a promissory note can be payable on sight, a bill cannot. 
D) Unlike certification of a cheque, acceptance of a bill would not create rights that Megan could use against the Bank of Swift Current. 
E) The reason that the bill is considered to be payable "on sight" is that it was created some time after Emile and Megan created their sales contract.

Question 9

Karinda sold a widget to Konrad.He paid the $150 000 purchase price by giving her a bill of exchange drawn on the Klondike Trust Co.Karinda is entitled to sue the drawee if the bill is not accepted.

Accepted Answer

A) True 
 B)False

Question 10

Alice bought a boat from Brian.The purchase price was $250 000.On February 1, she paid that price by giving him a bill of exchange drawn on her account at the Bank of Kenora.The bill was due on December 31 and it was payable to Brian.On March 1, Brian negotiated the bill to Carla.On April 1, the Bank of Kenora accepted the bill at Carla's request.On May 1, Carla placed a general endorsement on the bill and negotiated it to Dave.On June 1, Dave negotiated the bill to Edna.Every attempt at negotiation was successful.Which of the following statements is TRUE?

Accepted Answer

A) Brian could not have endorsed the bill. 
B) A situation may arise in which Carla is entitled to recover $250 000 from Brian. 
C) Although she is not entitled to receive more than $250 000 in total, Edna has acquired rights against Alice, Brian, and Carla, but not the Bank of Kenora. 
D) Dave must have added an accommodation endorsement. 
E) The Bank of Kenora has the secondary liability to pay Edna. 
A) Brian could not have endorsed the bill. 
B) A situation may arise in which Carla is entitled to recover $250 000 from Brian. 
C) Although she is not entitled to receive more than $250 000 in total, Edna has acquired rights against Alice, Brian, and Carla, but not the Bank of Kenora. 
D) Dave must have added an accommodation endorsement. 
E) The Bank of Kenora has the secondary liability to pay Edna.

Question 11

Alpha Corp appears to be the named payee of a cheque drawn by Ultimate Inc.Ultimate, however, insists that that piece of paper cannot possibly be treated as a valid cheque under the Bills of Exchange Act.That is TRUE if

Accepted Answer

A) the instrument was certified before being delivered. 
B) the instrument had been materially altered after being drafted. 
C) the instrument is drawn on Lester, who is the major shareholder of ultimate. 
D) payment is to be made from an overdrawn account. 
E) the instrument is postdated. 
A) the instrument was certified before being delivered. 
B) the instrument had been materially altered after being drafted. 
C) the instrument is drawn on Lester, who is the major shareholder of ultimate. 
D) payment is to be made from an overdrawn account. 
E) the instrument is postdated.

Question 12

Tara created a cheque for $5000 that was payable to bearer.She delivered it to Simon.Simon negotiated it to Melanie, who then negotiated it to Oscar, who then negotiated it to Mike.While Melanie had possession of the cheque, she altered it so that it now appears to be a cheque for $25 000.Which of the following statements is TRUE?

Accepted Answer

A) Mike is entitled to receive $50 000 from Tara as long as Melanie acted in good faith. 
B) If the alteration is apparent to the naked eye, the drawee bank would be entitled to debit $25 000 from Tara if she carelessly facilitated the alteration when she drafted the cheque. 
C) If the alteration is not apparent to the naked eye, Mike is entitled to receive $50 000 from Oscar. 
D) If the alteration is apparent to the naked eye, Mike is entitled to receive payment from Tara. 
E) If the alteration is not apparent to the naked eye, Mike is entitled to receive $5000 from Tara if she did not carelessly facilitate the alteration when she drafted the cheque. 
A) Mike is entitled to receive $50 000 from Tara as long as Melanie acted in good faith. 
B) If the alteration is apparent to the naked eye, the drawee bank would be entitled to debit $25 000 from Tara if she carelessly facilitated the alteration when she drafted the cheque. 
C) If the alteration is not apparent to the naked eye, Mike is entitled to receive $50 000 from Oscar. 
D) If the alteration is apparent to the naked eye, Mike is entitled to receive payment from Tara. 
E) If the alteration is not apparent to the naked eye, Mike is entitled to receive $5000 from Tara if she did not carelessly facilitate the alteration when she drafted the cheque.

Question 13

Roxanna bought a stereo from Sound Electronics.She paid the purchase price of $7500 by giving a promissory note to the store.The first time that Roxanna tried to operate the stereo outside of the store, it blew up due to a defect.She therefore refuses to honour the promissory note.Which of the following statements is TRUE?

Accepted Answer

A) Because the note was given to a company, Roxanna does not have a personal defence that she can use against Sound Electronics if it attempts to sue her on the note. 
B) The provisions in the Bills of Exchange Act dealing with consumer bills and notes would not apply if Roxanna used a cheque to pay for the stereo. 
C) Sound Electronics was required to mark the note as a "consumer note" if Roxanna intended to use the stereo for a business purpose. 
D) The provisions in the Bills of Exchange Act dealing with consumer bills and notes might apply if Roxanna paid with a cheque that was postdated for 15 days. 
E) Even if the promissory note was used for a consumer purchase, it may not be subject to the equities if Sound Electronics negotiated it to a holder in due course without notice that it was used for a consumer purchase. 
A) Because the note was given to a company, Roxanna does not have a personal defence that she can use against Sound Electronics if it attempts to sue her on the note. 
B) The provisions in the Bills of Exchange Act dealing with consumer bills and notes would not apply if Roxanna used a cheque to pay for the stereo. 
C) Sound Electronics was required to mark the note as a "consumer note" if Roxanna intended to use the stereo for a business purpose. 
D) The provisions in the Bills of Exchange Act dealing with consumer bills and notes might apply if Roxanna paid with a cheque that was postdated for 15 days. 
E) Even if the promissory note was used for a consumer purchase, it may not be subject to the equities if Sound Electronics negotiated it to a holder in due course without notice that it was used for a consumer purchase.

Question 14

Rod wanted to buy $25 000 worth of mandolins from Maggie, but there was a potential problem with payment.Although he did not have immediate access to the full price, Rod explained that he would be able to make monthly payments of $2500 by re-selling the mandolins in his music shop.Maggie was inclined to accept those payment terms, but she was worried that if the economy experienced a downturn, Rod would find it difficult, month after month, to meet his obligations.The parties therefore agreed to a compromise: Rod would immediately deliver a negotiable instrument that entitled Maggie to (a) monthly payments of $2500 plus interest, and (b) the full amount of the outstanding balance if Rod failed to make a monthly payment.That negotiable instrument can best be described as

Accepted Answer

A) a bill of exchange with a lump sum clause. 
B) a certified cheque with balance in default clause. 
C) a bill of exchange with a fast-track clause. 
D) a promissory note with a notice of dishonor. 
E) a promissory note with an acceleration clause. 
A) a bill of exchange with a lump sum clause. 
B) a certified cheque with balance in default clause. 
C) a bill of exchange with a fast-track clause. 
D) a promissory note with a notice of dishonor. 
E) a promissory note with an acceleration clause.

Question 15

Jacob Benito runs a business based in Norway that sells the steel used in hockey blades.Jacob sold $50 000 worth of steel to Wayne Lemieux of Canada on 8 August 2016.Using a bill of exchange, the two parties agreed that the $50 000 would not be due until 8 October 2016 and Wayne arranged for the payment to be made through his account at ABC Trust Company.Which of the following is true?

Accepted Answer

A) Jacob is the payee, Wayne is the drawer, and ABC is the drawee. 
B) Jacob is the drawee, Wayne is the drawer, and ABC is the payee. 
C) Jacob is the drawee, Wayne is the payee, and ABC is the drawer. 
D) Jacob is the payee, Wayne is the drawee, and ABC is the drawer. 
E) Jacob is the payee, Wayne is the drawee, and ABC is the other payee. 
A) Jacob is the payee, Wayne is the drawer, and ABC is the drawee. 
B) Jacob is the drawee, Wayne is the drawer, and ABC is the payee. 
C) Jacob is the drawee, Wayne is the payee, and ABC is the drawer. 
D) Jacob is the payee, Wayne is the drawee, and ABC is the drawer. 
E) Jacob is the payee, Wayne is the drawee, and ABC is the other payee.

Question 16

Ismail used a cheque to pay for a widget that he bought from Maria.Maria delivered the cheque to Geoff Gagne after writing her signature and the following words on the back of it: "To Geoff Gagne if he builds a gazebo in my backyard." After he acquired the cheque, Geoff wrote his signature and the following words on the back of it: "For deposit only." Which of the following statements is TRUE?

Accepted Answer

A) The cheque contains a qualified endorsement and a restrictive endorsement. 
B) The cheque contains a qualified endorsement and a special endorsement. 
C) Geoff can negotiate the cheque to Fawn by simply delivering it to her. 
D) The cheque contains a conditional endorsement and a restrictive endorsement. 
E) Geoff can require Ismail to add an accommodation endorsement to the cheque. 
A) The cheque contains a qualified endorsement and a restrictive endorsement. 
B) The cheque contains a qualified endorsement and a special endorsement. 
C) Geoff can negotiate the cheque to Fawn by simply delivering it to her. 
D) The cheque contains a conditional endorsement and a restrictive endorsement. 
E) Geoff can require Ismail to add an accommodation endorsement to the cheque.

Question 17

Sylvain attempted to draft a cheque in payment of a stereo that he wanted to purchase.A court subsequently held that the cheque was invalid.That may be TRUE because

Accepted Answer

A) Sylvain did not fill in the name of the payee. 
B) the cheque was postdated. 
C) Sylvain used a pencil rather than a pen. 
D) Sylvain wrote the name of a fictional person in the space allocated to the name of the payee. 
E) the amount was stated to be "a reasonable price for the stereo." 
A) Sylvain did not fill in the name of the payee. 
B) the cheque was postdated. 
C) Sylvain used a pencil rather than a pen. 
D) Sylvain wrote the name of a fictional person in the space allocated to the name of the payee. 
E) the amount was stated to be "a reasonable price for the stereo."

Question 18

Melinda is the holder in due course of a cheque drawn on Tyson's bank account.She therefore believes that she is entitled to receive payment from Tyson.Tyson, however, believes that he has a good defence to her claim.That will be TRUE if Tyson can prove the defence of

Accepted Answer

A) minority 
B) drunkenness. 
C) non-delivery of a completed cheque. 
D) no authority. 
E) failure of consideration. 
A) minority 
B) drunkenness. 
C) non-delivery of a completed cheque. 
D) no authority. 
E) failure of consideration.

Question 19

On June 1, Rituparna bought a widget from Joel.The price was $75 000.On that same day, she gave him a bill of exchange for that amount that was drawn on the Bank of Brandon.Which of the following statements is TRUE?

Accepted Answer

A) Rituparna is the drawee, Joel is the payee, and the Bank of Brandon is the acceptor. 
B) A bill of exchange must be payable on demand. 
C) The Bank of Brandon owes Rituparna a legal duty to accept the bill if Joel's account balance is at least $75 000. 
D) Unlike a cheque, a bill of exchange is automatically considered to be certified unless the relevant account is overdrawn. 
E) June 1 is not necessarily the due date. 
A) Rituparna is the drawee, Joel is the payee, and the Bank of Brandon is the acceptor. 
B) A bill of exchange must be payable on demand. 
C) The Bank of Brandon owes Rituparna a legal duty to accept the bill if Joel's account balance is at least $75 000. 
D) Unlike a cheque, a bill of exchange is automatically considered to be certified unless the relevant account is overdrawn. 
E) June 1 is not necessarily the due date.

Question 20

Wallace bought a widget from Sabrina.The price was $7500.When he collected the widget from her warehouse, he gave her a cheque that was drawn on his account at the Bank of Windsor.When he got the widget home, however, he discovered that it was defective.He therefore went to his bank and placed a stop payment order on the cheque.Which of the following statements is TRUE?

Accepted Answer

A) Wallace's cheque is overdrawn. 
B) When Sabrina presents the cheque for payment, the Bank of Windsor has a complete discretion to choose between honouring it and dishonouring it. 
C) Although he authorized the Bank of Windsor to debit his account when he wrote the cheque, Wallace's stop payment order revoked that authority. 
D) Sabrina can sue both Wallace and the Bank of Windsor if the bank refuses to honour the cheque. 
E) Sabrina is entitled to receive payment on the cheque if a court decides that Wallace was not entitled to discharge the sales contract on the basis that the goods were defective. 
A) Wallace's cheque is overdrawn. 
B) When Sabrina presents the cheque for payment, the Bank of Windsor has a complete discretion to choose between honouring it and dishonouring it. 
C) Although he authorized the Bank of Windsor to debit his account when he wrote the cheque, Wallace's stop payment order revoked that authority. 
D) Sabrina can sue both Wallace and the Bank of Windsor if the bank refuses to honour the cheque. 
E) Sabrina is entitled to receive payment on the cheque if a court decides that Wallace was not entitled to discharge the sales contract on the basis that the goods were defective.

Which of the following types of endorsements can you place upon a negotiable instrument without creating any risk of liability for yourself?

Which of the following statements is TRUE with respect to negotiable instruments?

Chris fraudulently induced Lucianna into drawing a cheque for $10 000.Chris then negotiated the cheque to Kenneth, who is a holder in due course.Is Kenneth entitled to receive payment on the cheque? Do you need any more information before answering that question? Explain your answer.

Assume that today is March 1.On February 1, Patricia bought a guitar from Metheny's Music Shop.The price was $2500.She gave the store a cheque for that amount that was dated June 1.Which of the following statements is now TRUE?

A sight draft allows the payee of a bill of exchange to receive payment immediately, whereas a demand draft only allows the payee to require the drawee to make payment within three days of presentation.

On May 1, Emile bought a widget from Megan.The price was $15 000.On June 1, Emile paid that price by giving Megan a bill of exchange that was drawn on the Bank of Swift Current.The bill was stated to be payable "on demand." Which of the following statements is TRUE?

Karinda sold a widget to Konrad.He paid the $150 000 purchase price by giving her a bill of exchange drawn on the Klondike Trust Co.Karinda is entitled to sue the drawee if the bill is not accepted.

Alpha Corp appears to be the named payee of a cheque drawn by Ultimate Inc.Ultimate, however, insists that that piece of paper cannot possibly be treated as a valid cheque under the Bills of Exchange Act.That is TRUE if

Sylvain attempted to draft a cheque in payment of a stereo that he wanted to purchase.A court subsequently held that the cheque was invalid.That may be TRUE because

Melinda is the holder in due course of a cheque drawn on Tyson's bank account.She therefore believes that she is entitled to receive payment from Tyson.Tyson, however, believes that he has a good defence to her claim.That will be TRUE if Tyson can prove the defence of

On June 1, Rituparna bought a widget from Joel.The price was $75 000.On that same day, she gave him a bill of exchange for that amount that was drawn on the Bank of Brandon.Which of the following statements is TRUE?

Risk Management and Sources of Law

Litigation and Alternative Dispute Resolution

Introduction to Torts

Intentional Torts

Miscellaneous Torts Affecting Business

Negligence

The Nature and Creation of Contracts

Consideration and Privity

Representations and Terms

Contractual Defects

Discharge and Breach

Contractual Remedies

Special Contracts: Sale of Goods

Real Property: Interests and Leases

Real Property: Sales and Mortgages

Personal Property: Bailment and Insurance

Intellectual Property

Electronic Commerce

Agency and Other Methods of Carrying on Business

Basic Forms of Business Organizations

Legal Rules for Corporate Governance

Secured Transactions

Dealing With Bankruptcy and Insolvency

Government Regulation of Business

Individual Employment

Organized Labour

Filters

Exam 27: Online: Special Contracts: Negotiable Instruments

Which of the following types of endorsements can you place upon a negotiable instrument without creating any risk of liability for yourself?

Which of the following statements is TRUE with respect to negotiable instruments?

Chris fraudulently induced Lucianna into drawing a cheque for $10 000.Chris then negotiated the cheque to Kenneth, who is a holder in due course.Is Kenneth entitled to receive payment on the cheque? Do you need any more information before answering that question? Explain your answer.

Assume that today is March 1.On February 1, Patricia bought a guitar from Metheny's Music Shop.The price was $2500.She gave the store a cheque for that amount that was dated June 1.Which of the following statements is now TRUE?

A sight draft allows the payee of a bill of exchange to receive payment immediately, whereas a demand draft only allows the payee to require the drawee to make payment within three days of presentation.

On May 1, Emile bought a widget from Megan.The price was $15 000.On June 1, Emile paid that price by giving Megan a bill of exchange that was drawn on the Bank of Swift Current.The bill was stated to be payable "on demand." Which of the following statements is TRUE?

Karinda sold a widget to Konrad.He paid the $150 000 purchase price by giving her a bill of exchange drawn on the Klondike Trust Co.Karinda is entitled to sue the drawee if the bill is not accepted.

Alpha Corp appears to be the named payee of a cheque drawn by Ultimate Inc.Ultimate, however, insists that that piece of paper cannot possibly be treated as a valid cheque under the Bills of Exchange Act.That is TRUE if

Sylvain attempted to draft a cheque in payment of a stereo that he wanted to purchase.A court subsequently held that the cheque was invalid.That may be TRUE because

Melinda is the holder in due course of a cheque drawn on Tyson's bank account.She therefore believes that she is entitled to receive payment from Tyson.Tyson, however, believes that he has a good defence to her claim.That will be TRUE if Tyson can prove the defence of

On June 1, Rituparna bought a widget from Joel.The price was $75 000.On that same day, she gave him a bill of exchange for that amount that was drawn on the Bank of Brandon.Which of the following statements is TRUE?

Risk Management and Sources of Law

Litigation and Alternative Dispute Resolution

Introduction to Torts

Intentional Torts

Miscellaneous Torts Affecting Business

Negligence

The Nature and Creation of Contracts

Consideration and Privity

Representations and Terms

Contractual Defects

Discharge and Breach

Contractual Remedies

Special Contracts: Sale of Goods

Real Property: Interests and Leases

Real Property: Sales and Mortgages

Personal Property: Bailment and Insurance

Intellectual Property

Electronic Commerce

Agency and Other Methods of Carrying on Business

Basic Forms of Business Organizations

Legal Rules for Corporate Governance

Secured Transactions

Dealing With Bankruptcy and Insolvency

Government Regulation of Business

Individual Employment

Organized Labour

Filters