Deck 24: Form and Content

Question 1

A draft involves three parties: a drawer, a drawee, and a payee.

Answer 1

True

Question 2

Jake signed and delivered a promissory note payable to Nancy.Nancy negotiated the note to Fred.Fred now has the same legal status as an assignee of a contract.

Answer 2

False

Question 3

An instrument payable at a definite time is time paper.

Answer 3

True

Question 4

An assignee of contractual rights acquires only the same rights as the assignor.

Question 5

Promissory notes serve an essential business purpose only in areas of high finance.

Question 6

Negotiability invests commercial paper with a high degree of marketability and commercial utility by allowing it to be freely transferable and enforceable by a holder in due course.

Question 7

A signed promissory note stating "I promise to pay to Bonnie Ramcell $600 on December 15, 2012" is not covered by Article 3 of the UCC.

Question 8

Although the name of Article 3 has been changed from "Commercial Paper" to "Negotiable Instruments," the 1990 Revision of the Code maintains the basic scope and content of prior Article 3.

Question 9

A maker must sign in the lower right-hand corner of the instrument.

Question 10

The Revised Article 3 of the UCC provides that a check which meets all requirements of being a negotiable instrument, except that it is not payable to bearer or order, is nevertheless a negotiable instrument.

Question 11

Only a bank may serve as the maker of a certificate of a deposit.

Question 12

To be negotiable, an instrument must be in writing.

Question 13

Handwritten words supersede typewritten words contained in commercial paper.

Question 14

An incomplete instrument is non-negotiable.However, when it is completed, it may become negotiable.

Question 15

Negotiability is wholly a matter of form.

Question 16

Notes and certificates of deposit are orders to pay money.

Question 17

A promissory note is an instrument that involves three parties in three capacities.

Question 18

A reference in a negotiable instrument to the existence of a separate agreement to which it is subject destroys the negotiability of the instrument.

Question 19

Paper payable "on demand" fails the test of negotiability in that it does not contain a specific time.

Question 20

A check is a draft payable on demand.

Question 21

A cashier's check is a check drawn by a bank upon itself to the order of a named payee.

Question 22

Carol buys some items at the drugstore and writes a check to the store on her account at First Bank.Who is the drawee?

A)Carol.
B)The drugstore.
C)First Bank.
D)There is none.

Question 23

Jones signed a 90-day note promising to pay $1,000 plus interest.The note states that interest is to be based on a variable, published rate external to the note.The sum the borrower must repay is uncertain, so the note is not negotiable under Revised Article 3.

Question 24

Postdating an instrument will destroy its negotiability.

Question 25

The person who signs a note and promises to pay it is the maker.

Question 26

A provision in a promissory note payable one year from its date that the maker may extend the maturity date six months impairs the note's negotiability.

Question 27

A certificate of deposit differs from a promissory note in that:

A)the maker is always a bank.
B)there are three parties to the transaction.
C)the payee of a CD must be paid on demand.
D)Both (a) and (b).

Question 28

Revised Article 3 eliminates the particular fund doctrine by providing that a promise or order is not made conditional because payment is to be made only out of a particular fund.

Question 29

By the concept of ____________, a transferee of a negotiable instrument can acquire greater rights than the transferor had.

A)holder in due course
B)assignment
C)commercial utility
D)sight drafts

Question 30

Bill goes to First Bank to get a loan.He signs a note and agrees to repay the bank.What is the legal term for Bill's status regarding the note?

A)Payee.
B)Maker.
C)Payor.
D)Drawer.

Question 31

An order to pay money drawn on a bank and payable on demand is a:

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

Question 32

The drawee is the individual who signs a check and promises to pay.

Question 33

Which of the following is not a negotiable instrument?

A)A check.
B)A draft.
C)A certificate of deposit.
D)A stock certificate.

Question 34

An "I.O.U." is a negotiable instrument.

Question 35

A __________ is a specialized form of promise to pay money given by a maker in which the bank is the maker.

A)note
B)certificate of deposit
C)trade acceptance
D)cashier's check

Question 36

Sam writes a check drawn on his account at First Bank to State University to pay his tuition.In this case:

A)Sam is the drawer.
B)the university is the drawee.
C)the bank is the payee.
D)Sam is the maker.

Question 37

The particular fund doctrine is:

A)merely an instruction to pay the instrument.
B)an undertaking to pay, which must be more than acknowledgment of an existing debt.
C)more important under Revised Article 3 than under the prior Article 3.
D)an order or promise to pay only out of a particular fund.

Question 38

An authorization to confess judgment on the instrument destroys its negotiability.

Question 39

To be negotiable, the instrument must satisfy all except which one of the following requirements?

A)It must contain a promise or order to pay.
B)It must be for a certain amount.
C)It must be payable on demand.
D)It must be signed.

Question 40

An "X" or a thumbprint could constitute a signature within the meaning of the term in the Code.

Question 41

The court in Cooperative Centrale Raiffeisen-Boerenleenbank B.A.v.Bailey found:

A)whether an instrument is negotiable is a question of fact.
B)whether an instrument is negotiable is to be determined without reference to the intent of the parties.
C)the wording of the note was unclear and therefore it did not fall within the UCC Article 3 requirements of negotiability.
D)the question of whether the promissory note was negotiable had to be determined by questioning the parties to the transaction as to their intent.

Question 42

Which of the following has been held to destroy the negotiability of an instrument and to render its transfer a contractual assignment?

A)"I wish you would pay."
B)"Pay to the order of John Jones."
C)"Pay bearer."
D)None of the above.

Question 43

A promise or order is unconditional unless it states that:

A)there is an express condition to payment.
B)the promise or order is subject to or governed by another writing.
C)rights or obligations concerning the order or promise are stated in another writing.
D)All of the above.

Question 44

A draft is payable "to the order of Joe Jones or to bearer." Sally finds it and demands payment.Should the drawer pay Sally?

A)No, unless Joe Jones's name is crossed off.
B)No, unless "bearer" is handwritten.
C)Yes, since the word "or" is contained in the instrument, either will do.
D)No, the terminology is ambiguous and therefore must be paid only to the order of Joe Jones.

Question 45

The UCC states that an instrument fulfills the requirements of being payable to bearer if it:

A)states it is payable to bearer or the order of bearer.
B)does not state a payee.
C)states it is payable to "cash" or to the order of "cash."
D)All of the above.

Question 46

A definite time required for negotiability would NOT be satisfied in which instance?

A)Payable on or before January 2, 2012.
B)Payable one week after demand is made.
C)Payable one year from the completion of the building.
D)Payable on June 15, 2012 or, if the building is not complete on that date, one year from that date.

Question 47

Negotiable instruments:

A)include drafts, assignments, and promissory notes.
B)are used primarily for smaller transactions.
C)in the form of checks have decreased in use since 1995.
D)have increased in usage to the point where they are now approximately equal to usage of cash for payments.

Question 48

Which of the following would be an unconditional promise or order to pay?

A)"I hereby acknowledge my debt to John Jones."
B)"I hereby assign all my rights under this instrument to John Jones."
C)"Pay to the order of bearer ten dollars."
D)"IOU fifty dollars."

Question 49

All but which one of the following is required of a negotiable instrument?

A)It must be payable only out of a particular fund.
B)It must contain an unconditional promise to pay a fixed amount in money.
C)It must be payable on demand or at a definite future date.
D)It must be in writing and signed by the maker or drawer.

Question 50

Which article of the UCC deals with "negotiable instruments"?

A)Article 1.
B)Article 2.
C)Article 3.
D)Article 9.

Question 51

Under the Check Clearing for the 21st Century Act:

A)a new negotiable instrument, called an IRD, was created.
B)banks are required to accept checks in electronic form.
C)Both of the above.
D)None of the above.

Question 52

Bill's car broke down on a dark, rainy night.Along came Andy in his service station's four-wheel drive truck with tools and supplies in the back.Bill didn't have any credit cards and only $3.25 cash, so Andy told him to write a check or an IOU.Neither Andy nor Bill had any paper, so Bill wrote on the cover of Andy's lunchbox: "If my car is fixed right by Andy Walcott, I will pay him $150.(Signed) Bill Boyd." Andy indorses the note and takes it to a commercial factor for negotiation.The factor refuses, saying it is non-negotiable because it:

A)is written on a lunchbox.
B)is conditional on satisfactory repair of the car.
C)mentions the existence of a contract to repair the car.
D)None of the above.

Question 53

References to other agreements in negotiable instruments:

A)destroy negotiability unless the recital makes the instrument subject to, or governed by, the terms of another agreement.
B)do not destroy negotiability in any circumstances.
C)do not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement.
D)None of the above.

Question 54

An instrument is payable to order if it is payable:

A)to the order of an identified person.
B)to an identified person or order.
C)Both of the above.
D)None of the above.

Question 55

A promise or order is payable at a definite time if it is payable at a:

A)time readily ascertainable at the time the promise or order is issued.
B)fixed date or dates.
C)definite period of time after sight or acceptance.
D)All of the above.

Question 56

Elmore purchases goods from Grady, and Elmore executes and delivers a negotiable note to Grady for $1,200, payable to Grady's order in 30 days.Two weeks later, Grady negotiates the note to McDaniel.Which of the following is true?

A)McDaniel is required to notify Elmore that he acquired the note.
B)If the goods are defective, Elmore's defense will necessarily be available against McDaniel.
C)Whether Elmore's defense is available against McDaniel will depend on whether McDaniel acquired the note in good faith and for value, had no knowledge of the defense, and took the note without reason to question its authenticity.
D)McDaniel can acquire no greater rights than Grady had in the note.

Question 57

X signs a negotiable instrument ordering Y to pay Z the sum of $500.Y is the:

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

Question 58

Which of the following will destroy negotiability?

A)Making the instrument subject to the terms of another agreement.
B)Making the instrument payable in German marks.
C)Signing a check in pencil.
D)Signing a check with an "X."

Question 59

Which of the following would be a bearer instrument?

A)A check payable to "cash."
B)A check that says "pay to the order of John Jones."
C)A check that says "pay to the order of bearer."
D)Two of the above, (a) and (c).

Question 60

Would an instrument containing the following language be negotiable? "Harold T.Stone, as President, hereby promises to pay $12,348 to the order of Joe Jones Furniture for office equipment for Redtyn Corporation, payable from its corporate assets.(Signed) Harold T.Stone as President, Redtyn Corporation."

A)No, because the promise refers to another contract.
B)No, because its payment is limited to a particular fund.
C)Yes, because Redtyn is a business entity.
D)Yes, because it meets all the requirements of negotiability.

Question 61

Identify which of the following meet the Article 3 negotiability requirement of being payable at a definite time: (a) A note payable "on or before June 14, 2012." (b) A dated instrument payable "30 days after date." (c) An undated instrument payable "30 days after date." (d) An instrument payable "when Baxter is promoted to plant manager." (e) A note payable on December 31, subject to acceleration by the holder." (f) A note granting the holder the option to extend maturity of the instrument for an indefinite period.

Question 62

What are the requirements of negotiability under the Code? List and briefly summarize them.

Question 63

Which of the following would NOT be negotiable? Explain.
a.A check with the amount payable omitted.
b.A draft for 3,000 bushels of corn.
c.A check written in pencil on a paper towel.
d.A note stating that it is secured by a mortgage on a specified parcel of land.
e.A note stating "IOU fifty dollars."

Question 64

Carlos wrote a check with the numbers $4500 and the written amount as forty-five dollars.Explain how the ambiguity will be resolved.

Question 65

Who are the parties to checks and notes?

Question 66

Distinguish between a note and a certificate of deposit.How are they alike? How are they different? Explain your answer.

Question 67

Explain the effect that a reference to other agreements has on negotiable instruments and the difference between a mere reference and a negotiable instrument's being subject to the terms of another agreement.