Exam 23: The Essentials of Negotiability

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On a sheet of paper,Elle writes,without her signature,"I acknowledge that I owe Frank $600,payable out of the proceeds of the sale of my car,a 1995 Honda Civic,which I promise to advertise 'For Sale' next week.Payment is to be made on or before six months from today." What type of instrument is this? Is it nego?tiable? If not,why not?

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Question 1

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This instrument is a promissory note,but it is nonnegotia?ble.A promissory note is an instrument with two parties-a maker and a payee.The maker of this note is Elle.The payee is Frank.The note is nonnegotiable because (1) Elle did not sign it; (2) it does not include a defi?nite promise to pay but only acknowl?edges that a debt is owed; (3) it is un?dated,which means that the end of the six-month period is uncertain,making the note not payable at a definite time; and (4) it is payable only to Frank,not to his order or to bearer.Any of these alone would make the note nonnegotiable.(Pay?ment is also conditioned on the sale of Elle's car,but this does not make the note nonnegotiable.)

Jared writes Lisa a check for $500.Because the check does not specify a time of payment,it is considered a

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Question 2

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Sarah has a checking account at Secure Bank.Sarah buys her roommate Sophie's two tickets to a Broadway musical for $200.Sarah writes Sophie a check for the tickets.In this situation,Secure Bank is the

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Question 3

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The recipient of a negotiable instrument becomes a holder regardless of the form of the transfer.

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Question 4

A check "payable to the order of bearer" is neither an order instrument nor a bearer instrument.

(True/False)

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Question 5

The writing evidencing a negotiable instrument must be on material that lends itself to permanence.

(True/False)

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Question 6

An instrument that states simply "I.O.U." is NOT negotiable.

(True/False)

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Question 7

An instrument does not need to be portable to be negotiable.

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Question 8

An instrument "payable to bearer" is transferable but not negotiable.

(True/False)

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Question 9

Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is

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Question 10

A check is not negotiable if it is payable on demand or at a definite time.

(True/False)

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Question 11

InterComp normally sells $50,000 worth of software to Power Source,a retail elec?tronics store,each summer on terms requiring payment in sixty days. One year,InterComp wants cash,but Power Source wants the usual sixty days. To meet both needs,the parties can arrange

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Question 12

USA Gasoline Corporation signs an instrument that states it is being exe?cuted "in accord with a contract for the sale of 4,000 barrels of oil dated May 1." This instrument is

(Multiple Choice)

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Question 13

Opal signs a promissory note payable to the order of Payday Loan Company.The note states that it is payable "with interest at the legal rate." This note is

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Question 14

An instrument that promises to pay "in Microsoft stock" can be negotiable.

(True/False)

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Question 15

To borrow money to finance the start-up of his business,Bob executes an instrument in favor of City Bank.For the instru?ment to be negotiable,the signature must be

(Multiple Choice)

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Question 16

Rubber stamp signatures can be legally binding signatures.

(True/False)

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Question 17

On April 1 Richard arranges to buy a sixteen-speed bike from his neighbor Phil for $500.Phil agrees to deliver the bike on May 1.Richard writes a draft for $500 payable to Phil on May 1.In this situation,the draft is a

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Question 18

EZ Credit Company signs an instrument payable to the order of Flem that states,"The maker of this note at the date of maturity,May 1,2015,can extend the time of pay?ment,but for no more than a rea?sonable time." This instrument is

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Question 19

A check is a draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of money to the holder on demand.

(True/False)

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Question 20

Showing 1 - 20 of 72

Exam 23: The Essentials of Negotiability

Jared writes Lisa a check for $500.Because the check does not specify a time of payment,it is considered a

Sarah has a checking account at Secure Bank.Sarah buys her roommate Sophie's two tickets to a Broadway musical for $200.Sarah writes Sophie a check for the tickets.In this situation,Secure Bank is the

The recipient of a negotiable instrument becomes a holder regardless of the form of the transfer.

A check "payable to the order of bearer" is neither an order instrument nor a bearer instrument.

The writing evidencing a negotiable instrument must be on material that lends itself to permanence.

An instrument that states simply "I.O.U." is NOT negotiable.

An instrument does not need to be portable to be negotiable.

An instrument "payable to bearer" is transferable but not negotiable.

Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is

A check is not negotiable if it is payable on demand or at a definite time.

InterComp normally sells $50,000 worth of software to Power Source,a retail elec?tronics store,each summer on terms requiring payment in sixty days. One year,InterComp wants cash,but Power Source wants the usual sixty days. To meet both needs,the parties can arrange

USA Gasoline Corporation signs an instrument that states it is being exe?cuted "in accord with a contract for the sale of 4,000 barrels of oil dated May 1." This instrument is

Opal signs a promissory note payable to the order of Payday Loan Company.The note states that it is payable "with interest at the legal rate." This note is

An instrument that promises to pay "in Microsoft stock" can be negotiable.

To borrow money to finance the start-up of his business,Bob executes an instrument in favor of City Bank.For the instru?ment to be negotiable,the signature must be

Rubber stamp signatures can be legally binding signatures.

On April 1 Richard arranges to buy a sixteen-speed bike from his neighbor Phil for $500.Phil agrees to deliver the bike on May 1.Richard writes a draft for $500 payable to Phil on May 1.In this situation,the draft is a

EZ Credit Company signs an instrument payable to the order of Flem that states,"The maker of this note at the date of maturity,May 1,2015,can extend the time of pay?ment,but for no more than a rea?sonable time." This instrument is

A check is a draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of money to the holder on demand.

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