Deck 19: Nature and Types of Negotiable Instruments

Question 1

An instrument "payable to order" is payable to a specific person or to anyone that person designates.

Answer 1

True

Question 2

A draft made out in the United States calls for payment in German marks. Which of the following statements is correct?

A) The draft is nonnegotiable since it must be paid in German marks.
B) The draft is nonnegotiable because the rate of exchange fluctuates and it will interfere with the requirement that the instrument be payable in a fixed sum of money.
C) The draft is negotiable if it satisfies all the requirements of negotiability under Article 3 of the UCC.
D) The instrument is negotiable only if the exchange rate is written on the draft.

Answer 2

C

Question 3

A draft involves two parties, the drawer and the payee.

Answer 3

False

Question 4

A promissory note and a certificate of deposit has three parties, the maker, the makee, and the payee.

Question 5

A written order by one person directing the person's bank to pay a certain sum of money to another person is a

A) promissory note.
B) certificate of deposit.
C) draft.
D) check.

Question 6

A certificate of deposit is actually a loan by a depositor to a bank.

Question 7

One way to classify a negotiable instrument is either a demand instrument or a time instrument.

Question 8

Negotiable instruments can be used either as a substitute for money or as a means of extending credit.

Question 9

A promise to pay $1,000 and a golf bag would not be negotiable.

Question 10

The person who issues a check to another is called the

A) maker.
B) payee.
C) drawee.
D) drawer.

Question 11

A note or a check payable in a foreign currency that is the legal currency of that foreign country is fully negotiable.

Question 12

A negotiable instrument is

A) required to be in writing.
B) a means of extending credit.
C) a substitute for money.
D) all of these.

Question 13

An "X" or a thumb print qualifies as a signature on a negotiable instrument.

Question 14

A check is always payable on demand.

Question 15

The party who issues a promissory note is called the payee.

Question 16

There is no such thing as an oral note or check.

Question 17

Which of the following statements is true?

A) In order for a check to be negotiable, the drawee must be named in the instrument.
B) A check is a type of draft.
C) A check is a popular form of negotiable instrument.
D) All of these.

Question 18

Today check processing is done electronically. Consequently a check written on any one day and passed on to the bank can now be deducted from your account that same day.

Question 19

The words order and bearer are words of negotiability.

Question 20

Article 3 of the UCC is the statutory law that governs negotiable instruments.

Question 21

It is not a requirement of a negotiable instrument that it

A) be payable in money.
B) be payable at a specified or determinable time.
C) be payable at a definite time.
D) contain an unconditional promise to pay.

Question 22

A(n) ____________________ is a promise by a bank to repay money left on deposit by a depositor.

Question 23

A promissory note payable "on the day of the next presidential election" is

A) nonnegotiable.
B) unenforceable.
C) void.
D) negotiable.

Question 24

If an instrument is negotiable, it

A) can be transferred freely from one person to another.
B) must be payable on demand.
C) must always be payable to a bank.
D) must be payable from a special fund.

Question 25

The signature on a negotiable instrument must

A) be handwritten.
B) be typed.
C) be that of the maker or drawer.
D) appear in the lower right-hand corner of the instrument.

Question 26

An IOU for $500 is

A) illegal.
B) a legal substitute for a check.
C) negotiable if properly signed.
D) nonnegotiable.

Question 27

An instrument stating on its face, "Pay to Robert Stevens or bearer" is

A) nonnegotiable.
B) negotiable.
C) an order instrument.
D) a draft.

Question 28

A(n) ____________________ refers to a written document that can be used as a substitute for money.

Question 29

For an instrument to be negotiable it must

A) contain the word order or bearer.
B) be written.
C) contain the date the instrument was prepared.
D) contain the word order or bearer and be written.

Question 30

A promissory note is not negotiable if it is

A) not dated.
B) payable thirty days after the death of the maker.
C) signed by having the signature typed on the note.
D) payable thirty days after the date of the note.

Question 31

An instrument is not negotiable if it is

A) payable in Canadian money.
B) not dated.
C) to be paid when the maker gets married.
D) written in pencil.

Question 32

Samuels gave Albrite's Lumber Company a ninety-day promissory note for $2,000 for goods purchased. Albrite's Lumber Company is legally known as the

A) drawer.
B) drawee.
C) maker.
D) payee.

Question 33

The drawee of a check is always the

A) person who will receive the money.
B) holder of the check.
C) bank.
D) depositor.

Question 34

A negotiable promissory note must contain

A) a date.
B) the letters IOU.
C) the words value received.
D) words indicating a promise to pay.

Question 35

A form of time draft called a(n) ____________________ is used by a seller as a credit device.

Question 36

An instrument is payable or at a definite time if it is payable

A) upon someone's death.
B) when a certain event occurs.
C) thirty days after a certain date.
D) to a bank.

Question 37

A(n) ____________________ is a written promise by one party to pay a certain sum of money to another party.

Question 38

A check made payable to "Cash" is

A) payable to the bearer.
B) nonnegotiable.
C) void.
D) an order instrument.

Question 39

If an instrument contains an order or promise to do anything else in addition to the payment of money, it will not be ____________________.

Question 40

In regard to a promissory note, the person obligated to pay is the

A) payor.
B) promissor.
C) bank.
D) maker.

Question 41

A promissory note states that the note is due one year from March 31, 2010 "with interest at the current rate." Is this instrument negotiable?

Question 42

A check dated later than the date it was originally made out is called a(n) ____________________ check.

Question 43

Parris signed a promissory note agreeing to pay $1,000 to Golden thirty days after graduating from college. Is this note negotiable?

Question 44

Barnes made out a check payable to the order of Williams. The amount written in figures was "$10.00"; the amount written in words was "One hundred and 00/100 dollars." Is this check negotiable? If so, what amount will be paid?

Question 45

The words "value received" inserted on the face of a promissory note mean that ____________________ was given for the instrument.

Question 46

For an instrument to be negotiable, the promise or order must be ____________________.

Question 47

What are the two major uses of a negotiable instrument and what types of negotiable instruments serve each purpose?

Question 48

What is the importance of placing the words "order" or "bearer" on an instrument?

Question 49

An instrument is payable to ____________________ if it is to be paid to whomever has possession of it.

Question 50

Under the UCC, if there is a discrepancy between the amount written in words and the amount indicated in figures on an instrument, the amount written in ____________________ would be paid.