Question 1

A trade acceptance is a draft.

Accepted Answer

A) True 
 B)False  True

Question 2

Diners Restaurant issues an instrument in favor of Eatery Supplies, Inc. For the instrument to be negotiable, it need not

Accepted Answer

A)  be an unconditional promise or order to pay. 
B)  be payable on demand or at a specific time. 
C)  be signed by Diner's Restaurant. 
D)  recite the consideration given in exchange for a promise to pay. 
A)  be an unconditional promise or order to pay. 
B)  be payable on demand or at a specific time. 
C)  be signed by Diner's Restaurant. 
D)  recite the consideration given in exchange for a promise to pay. D

Question 3

On a trade acceptance, the drawer is also the payee.

Accepted Answer

A) True 
 B)False  True

Question 4

Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games. This instrument is

Accepted Answer

A)  a bearer instrument. 
B)  an order instrument. 
C)  valid but nonnegotiable. 
D)  void. 
A)  a bearer instrument. 
B)  an order instrument. 
C)  valid but nonnegotiable. 
D)  void.

Question 5

Pam signs an instrument payable to the order of Quick Credit, Inc., that allows a holder to demand payment of the entire amount due, with inter?est, if Pam fails to make a payment. This instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because a holder can move up the payment date. 
C)  nonnegotiable, because moving up the payment date is conditional. 
D)  nonnegotiable, because the exact payment date cannot be deter?mined from the face of the instrument. 
A)  negotiable. 
B)  nonnegotiable, because a holder can move up the payment date. 
C)  nonnegotiable, because moving up the payment date is conditional. 
D)  nonnegotiable, because the exact payment date cannot be deter?mined from the face of the instrument.

Question 6

A certificate of deposit is a type of draft.

Accepted Answer

A) True 
 B)False

Question 7

Fact Pattern 24-2B 
Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012.
-Refer to Fact Pattern 24-2B. The instrument that Ewa signed is most likely

Accepted Answer

A)  a certificate of deposit. 
B)  a draft. 
C)  an order to pay. 
D)  a promissory note. 
A)  a certificate of deposit. 
B)  a draft. 
C)  an order to pay. 
D)  a promissory note.

Question 8

An instrument that states simply "I.O.U." is negotiable.

Accepted Answer

A) True 
 B)False

Question 9

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, 2011, can extend the time of pay?ment, but for no more than a rea?sonable time." This instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because it includes an extension clause. 
C)  nonnegotiable, because it is not payable within a definite time. 
D)  nonnegotiable, because it is payable to a specific payee. 
A)  negotiable. 
B)  nonnegotiable, because it includes an extension clause. 
C)  nonnegotiable, because it is not payable within a definite time. 
D)  nonnegotiable, because it is payable to a specific payee.

Question 10

A notation on a check that it is "nonnegotiable" is sufficient to render it nonnegotiable.

Accepted Answer

A) True 
 B)False

Question 11

Wilbur signs a note that includes a clause under which the note's holder can delay the date of its payment indefinitely. This is

Accepted Answer

A)  an acceleration clause. 
B)  an extension clause. 
C)  an immaturity clause. 
D)  a stop-payment clause. 
A)  an acceleration clause. 
B)  an extension clause. 
C)  an immaturity clause. 
D)  a stop-payment clause.

Question 12

Bill signs a check payable to the order of City Bank, filling in the blanks for the amount with the figures "$100" and "One thousand and 00/100 dol?lars." This check is payable in the amount of

Accepted Answer

A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $1,100. 
A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $1,100.

Question 13

As a substitute for money, an instrument does not have to be signed by anyone to be nego?tiable.

Accepted Answer

A) True 
 B)False

Question 14

International Properties, Inc. (IPI), signs an instrument in favor of Financial Investments Corporation that includes the statement "IPI plans to pay this debt from the proceeds of the sale of the IPI Office Building in Montreal." This instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because banks cannot easily process office buildings. 
C)  nonnegotiable, because it refers to a separate sale. 
D)  nonnegotiable, because Montreal is in Canada, not the United States. 
A)  negotiable. 
B)  nonnegotiable, because banks cannot easily process office buildings. 
C)  nonnegotiable, because it refers to a separate sale. 
D)  nonnegotiable, because Montreal is in Canada, not the United States.

Question 15

Jack signs an instrument that states it is being executed "in accord with a contract for the sale of three magic beans dated June 1." This instru?ment is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because banks cannot easily process commodities. 
C)  nonnegotiable, because it includes the specific date of a contract. 
D)  nonnegotiable, because it refers to an express contract. 
A)  negotiable. 
B)  nonnegotiable, because banks cannot easily process commodities. 
C)  nonnegotiable, because it includes the specific date of a contract. 
D)  nonnegotiable, because it refers to an express contract.

Question 16

Any person in possession of a negotiable instrument payable to bearer is a holder.

Accepted Answer

A) True 
 B)False

Question 17

Julie signs a check payable to the order of Kwik Mart Stores, Inc., that does not include a date. This check is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because it does not include a date. 
C)  nonnegotiable, because it is payable to Kwik-Mart. 
D)  nonnegotiable, because it is signed by Julie. 
A)  negotiable. 
B)  nonnegotiable, because it does not include a date. 
C)  nonnegotiable, because it is payable to Kwik-Mart. 
D)  nonnegotiable, because it is signed by Julie.

Question 18

Dino, the chief executive officer of Electrician Services, Inc., signs an in?strument by plac?ing his thumbprint on it. This instru?ment is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because a thumbprint does not state the signer's name. 
C)  nonnegotiable, because a thumbprint implies a lack of binding intent. 
D)  nonnegotiable, because a thumbprint is not a signature. 
A)  negotiable. 
B)  nonnegotiable, because a thumbprint does not state the signer's name. 
C)  nonnegotiable, because a thumbprint implies a lack of binding intent. 
D)  nonnegotiable, because a thumbprint is not a signature.

Question 19

Will signs a check payable to "X" and gives it to Yves. This check is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because it does not indicate a specific payee. 
C)  nonnegotiable, because obviously it was executed as a joke. 
D)  nonnegotiable, because "Yves" is not "X." 
A)  negotiable. 
B)  nonnegotiable, because it does not indicate a specific payee. 
C)  nonnegotiable, because obviously it was executed as a joke. 
D)  nonnegotiable, because "Yves" is not "X."

Question 20

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

Accepted Answer

A)  anywhere on the instrument. 
B)  anywhere on the lower half of the instrument only. 
C)  in the lower left-hand corner of the instrument only. 
D)  in the lower right-hand corner of the instrument only. 
A)  anywhere on the instrument. 
B)  anywhere on the lower half of the instrument only. 
C)  in the lower left-hand corner of the instrument only. 
D)  in the lower right-hand corner of the instrument only.

Exam 24: The Function Creation of Negotiable Instruments

A trade acceptance is a draft.

Diners Restaurant issues an instrument in favor of Eatery Supplies, Inc. For the instrument to be negotiable, it need not

On a trade acceptance, the drawer is also the payee.

Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games. This instrument is

Pam signs an instrument payable to the order of Quick Credit, Inc., that allows a holder to demand payment of the entire amount due, with inter?est, if Pam fails to make a payment. This instrument is

A certificate of deposit is a type of draft.

Fact Pattern 24-2B Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012. -Refer to Fact Pattern 24-2B. The instrument that Ewa signed is most likely

An instrument that states simply "I.O.U." is negotiable.

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, 2011, can extend the time of pay?ment, but for no more than a rea?sonable time." This instrument is

A notation on a check that it is "nonnegotiable" is sufficient to render it nonnegotiable.

Wilbur signs a note that includes a clause under which the note's holder can delay the date of its payment indefinitely. This is

Bill signs a check payable to the order of City Bank, filling in the blanks for the amount with the figures "$100" and "One thousand and 00/100 dol?lars." This check is payable in the amount of

As a substitute for money, an instrument does not have to be signed by anyone to be nego?tiable.

International Properties, Inc. (IPI), signs an instrument in favor of Financial Investments Corporation that includes the statement "IPI plans to pay this debt from the proceeds of the sale of the IPI Office Building in Montreal." This instrument is

Jack signs an instrument that states it is being executed "in accord with a contract for the sale of three magic beans dated June 1." This instru?ment is

Any person in possession of a negotiable instrument payable to bearer is a holder.

Julie signs a check payable to the order of Kwik Mart Stores, Inc., that does not include a date. This check is

Dino, the chief executive officer of Electrician Services, Inc., signs an in?strument by plac?ing his thumbprint on it. This instru?ment is

Will signs a check payable to "X" and gives it to Yves. This check is

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

Introduction to Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Constitutional Authority to Regulate Business

The Statute of Fraudswriting Requirements

Ethics and Business Decision Making

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Internet Law

Criminal Law and Cyber Crimes

Nature and Terminology

Agreement

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

E-Contracts and E-Signatures

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Checks, the Banking System, and E-Money

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Agency Formation and Duties

Liability to Third Parties and Termination

Employment and Labor Law

Employment Discrimination

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Partnerships and Limited Liability Partnerships

Limited Liability Companies Special Business Forms

Corporationsformation and Financing

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Corporationsmerger, Consolidation, Termination

Corporationssecurities Law Corporate Governance

Law for Small Businesses

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Environmental Law

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Personal Property and Bailments

Real Property and Landlord-Tenant Relationships

Insurance

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Professional Liaility and Accountability

International Law in a Global Economy

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Loan Security and Repossession in Credit Transactions

Employment Law and Ethics

Legal Issues in Corporate Governance and Business Operations