Deck 26: Negotiable Instruments: Negotiability and Transferability

Question 1

If an instrument fails to qualify as a negotiable instrument, that means that the instrument fails to be an enforceable contract.

Answer 1

False

Question 2

Which of the following is true regarding payment on a time instrument?

A) It is payable in the same manner as a demand instrument.
B) It may be made payable at a past or future date so long as a method for computing past-due interest is set forth in the document.
C) It must be payable at a future time, and the date must be determinable through a separate instrument prepared in conjunction with the time instrument.
D) It may be made payable at a past or future date so long as the method of computing interest is set forth either in the time instrument itself or in a separate document prepared in conjunction with the time instrument.
E) It must be payable at a specific future time which is easily determinable from the document itself.

Answer 2

It must be payable at a specific future time which is easily determinable from the document itself.

Question 3

Even the mention of another document in an instrument prevents the instrument from being negotiable.

Answer 3

False

Question 4

Which of the following is true if an instrument fails to qualify as a negotiable instrument?

A) The instrument by definition fails to be a good contract.
B) Failure to qualify as a negotiable instrument does not mean the instrument fails to be a good contract.
C) The instrument by definition is a good contract.
D) The instrument by definition is a good contract only if it is made out in an amount less than $1,000.
E) The instrument by definition is a good contract only if it is made out in an amount more than $1,000.

Question 5

Which of the following is true regarding negotiation of an instrument?

A) Negotiation of both an order instrument and bearer instrument is by delivery alone.
B) Negotiation of both an order instrument and bearer instrument require endorsement plus delivery.
C) Negotiation of an order instrument is by endorsement plus delivery, while negotiation of a bearer instrument is by delivery alone.
D) Negotiation of a bearer instrument is by endorsement plus delivery, while negotiation of an order instrument is by delivery alone.
E) Negotiation of both an order instrument and a bearer instrument requires both delivery and an additional three days to allow for bank clearance.

Question 6

A note is a promise, by the maker of the note, to pay a payee.

Question 7

Which of the following was the ruling of the court in the Case Opener regarding the gambler who wrote bad checks to a casino to purchase markers and then tried to avoid payment on the basis of an oral agreement by which a casino host told the gambler that he already had sufficient remaining casino credit to receive the markers?

A) The potential oral agreement as to the markers was irrelevant to the negotiability of the checks.
B) The oral agreement was relevant to the negotiability of the checks, but it did not affect the gambler's liability on the checks.
C) The oral agreement was relevant to the negotiability of the checks, and acted to excuse the gambler from liability on the checks.
D) The oral agreement established that the checks were not negotiable instruments.
E) The oral agreement established breach of contract; therefore, while another type of instrument would have been negotiable, the checks involved were not.

Question 8

Suzanne arranged with ABC Bank for a revolving line of credit up to $50,000 for her antique shop. The bank also required that she provide a promissory note promising payment of $50,000 to the bank or as much as may be outstanding in amounts owed to the bank payable on demand. The note allowed for partial early prepayment and for interest after default. A few months later, although Suzanne was not in default, the bank canceled the line of credit and demanded payment of all amounts due based on the promissory note. If the reasoning of the case in the text Reger Development, LLC v. National City Bank is followed, which of the following is the most likely result of the dispute between Suzanne and ABC Bank?

A) Suzanne will prevail because she was current on payments, and the bank did not exercise good faith in calling the note.
B) Suzanne will prevail because the reference to prepayment destroyed the note's negotiability.
C) Suzanne will prevail because the reference to interest after default destroyed the note's negotiability.
D) The bank will prevail because, although the note is not a negotiable instrument, the bank has an enforceable contract.
E) The bank will win because it had the right to call for payment of the demand instrument.

Question 9

Which of the following is true regarding negotiable instruments in the European Union?

A) If a transaction is defined as a negotiable instrument within a certain country, it must conform to certain general characteristics outlined by the European Economic Council.
B) The European Economic Council adopted the UCC as the law in regard to negotiable instruments in all member countries of the European Union.
C) The European Economic Council adopted the UCC as the law in regard to negotiable instruments in all member countries of the European Union unless a member country has specifically opted out.
D) The European Economic Council suggests the UCC as the law in regard to negotiable instruments in all member countries of the European Union; but in order for it to be applicable, a member country must specifically affirm adoption of the UCC.
E) Negotiable instruments are not recognized.

Question 10

Which of the following is a written document containing the signature of the creator that makes an unconditional promise or order to pay a sum certain in money at either a time certain or on demand?

A) A negated instrument
B) A promised instrument
C) A negotiable instrument
D) A promissory agreement
E) A negotiable agreement

Question 11

Which of the following is known as a substitute for cash?

A) A negotiable instrument
B) A nonnegotiable instrument
C) A payable document
D) A nonpayable document
E) An endorsed payable document

Question 12

In order to satisfy the requirement of negotiability that payment be at a time certain or on demand, acceleration of payment is not allowable.

Question 13

The law does not permit an oral negotiable instrument.

Question 14

An automated signature satisfies the UCC requirement that the signature of the creator appear in order for an instrument to be negotiable.

Question 15

A draft is an order by a drawer to a drawee to pay a payee.

Question 16

Which of the following was the result in Samuel James Thompson v. First Citizens Bank & Trust Co., the case in the text in which the parties disagreed as to whether an instrument referenced as a certificate of deposit was actually negotiable?

A) The court ruled that the instrument was negotiable.
B) The court ruled that the instrument was not negotiable because it clearly stated that it was non-transferable.
C) The court ruled that the instrument was not negotiable because it lacked the signatures of both parties.
D) The court ruled that the instrument was not negotiable because it lacked the signature of a bank representative.
E) The court ruled that the instrument was not negotiable because it contained a condition precedent and was not an unconditional order to pay.

Question 17

A negotiable instrument must be a conditional order to pay.

Question 18

A currency or cash substitution is a relatively new development in the law arising in the 20^th century.

Question 19

All negotiable documents may be in electronic format.

Question 20

The words "pay to cash" are sufficient words of negotiability.

Question 21

A ______ is a specific draft, drawn by the owner of a checking account, ordering the bank to pay the payee from that drawer's account.

A) Promissory contract
B) Certificates of deposit
C) Note
D) Check
E) Time instrument

Question 22

Which of the following was the result in State v. Warner, the case in the text involving whether an electronic transfer qualified as a "draft" or "other written statement" for purposes of establishing a violation of state law?

A) That an electronic transfer qualified as a draft or other written statement for purposes of establishing a violation of the state law at issue.
B) That an electronic transfer did not qualify as a draft or other written statement for purposes of establishing a violation of the state law at issue.
C) That an electronic transfer qualified as a draft or other written statement for purposes of establishing a violation of the state law at issue only if it could be established that a bank official described the transaction as a "draft."
D) That an electronic transfer qualified as a draft or other written statement for purposes of establishing a violation of the state law at issue only if it could be established that a bank official described the transaction as a "negotiable."
E) That the issue of whether the instrument was a draft or other written statement was irrelevant because the state law at issue was unconstitutional.

Question 23

Which of the following is true regarding simple contracts as compared to negotiable instruments?

A) Simple contracts are assigned to an assignee, while negotiable instruments are negotiated to a holder.
B) Simple contracts may be assigned to an assignee or negotiated to a holder while negotiable instrument may only be negotiated to a holder in due course.
C) Simple contracts may be assigned to an assignee or negotiated to a holder while negotiable instrument may only be negotiated to a holder.
D) Simple contracts may not be assigned while negotiable instruments may be negotiated to holder.
E) Simple contracts may be assigned to a holder while negotiable instruments may not be assigned or negotiated.

Question 24

Documents used as payments to facilitate commercial transactions were labeled as ______ under article 3 of the UCC.

A) Commerce paper
B) Commercial paper
C) Commerce notes
D) Negotiable instruments
E) Payment notes

Question 25

Which of the following is a promise made by a bank to pay a payee a certain amount of money at a future time?

A) A note
B) A draft
C) A novation
D) A check
E) A certificate of deposit

Question 26

The UCC defines an instrument "payable on demand" as one that ____.

A) States that it is payable on demand or at sight, or that it is payable 20 days after presentment
B) States that it is payable 30 days after presentment
C) Is payable within 10 days after presentment
D) States that it is payable on demand or at sight or otherwise indicates that it is payable at the will of the holder, or does not state any time of payment
E) States that it is payable on demand or at sight or otherwise indicates that it is payable at the will of the holder; does not state any time of payment; or is payable within ten days after presentment

Question 27

Which of the following is false regarding the UCC's signature requirement for a negotiable instrument?

A) The signature may be an assumed name.
B) A signature may be made by means of a device or machine.
C) A signature may be made manually.
D) The signature of an agent on behalf of the principal binds the principal and satisfies the signature requirement.
E) The UCC prohibits an "X" from being used as a signature.

Question 28

Which of the following is true regarding the relationship between negotiability and an unconditional promise or order to pay?

A) There is no such requirement in order to find negotiability.
B) A promise or order to pay must be specific and not be implied in order for negotiability to be found.
C) Simply acknowledging a debt satisfies the negotiability requirement of an unconditional promise to pay.
D) A common IOU is sufficient to satisfy the negotiability requirement of an unconditional promise to pay.
E) An offer of unconditional partial payment satisfies requirements of negotiability.

Question 29

Which of the following is an example of a negotiable instrument?

A) Checks but not drafts or promissory notes
B) Drafts and checks, but not promissory notes
C) Promissory notes, but not drafts or checks
D) Promissory notes and checks, but not drafts
E) Checks, drafts, and promissory notes

Question 30

Which of the following is true when an instrument fails to meet the technical requirements necessary to qualify as a negotiable instrument?

A) The instrument is still enforced as a negotiable instrument if it has been transferred to a holder in due course.
B) The instrument is still enforced as a negotiable instrument if it has been accepted by a bank.
C) The instrument is still enforced as a negotiable instrument if the holder can establish detrimental reliance based on a reasonable belief that the instrument qualified as a negotiable instrument.
D) The instrument is may qualify as an enforceable contract.
E) The instrument is null and void and of no use to the holder.

Question 31

With a[n] ______ instrument, payment can be made only at a specific time designated in the future.

A) Time
B) Demand
C) Recourse
D) Nonrecourse
E) Immediate

Question 32

Which of the following is true regarding the status of negotiable instruments in regard to international transactions?

A) The World Trade Organization defines and enforces concepts of negotiability for all member nations.
B) The United Nations Committee on Contracts defines and enforces concepts of negotiability for all member nations.
C) The Uniform Commercial Code is accepted as the defining word on negotiability in North America and Europe.
D) The Uniform Negotiation Act, agreed upon by a majority of countries, addresses definitions in regard to negotiability.
E) The definitions in regard to negotiable contracts vary from country to country.

Question 33

What does the term "float" in banking reference?

A) The time it takes for a check to go through the traditional check-clearing process and be paid.
B) The time it takes for a bank authority to report a bad check to the issuing bank.
C) The time it takes to convert a nonnegotiable instrument to a negotiable instrument.
D) The time it takes to convert a time instrument to a demand instrument.
E) The time it takes to convert a demand instrument to a time instrument.

Question 34

A certificate of deposit is a ______ of the bank.

A) note
B) draft
C) novation
D) check
E) promissory contract

Question 35

Documents used as payments to facilitate commercial transactions were originally generically called ____.

A) Negotiable instruments
B) Commercial paper
C) Promissory paper
D) Commerce notes
E) Payment notes

Question 36

Which of the following is a check accepted by the bank on which it is drawn?

A) Cashier's check
B) Traveler's check
C) Certified check
D) Check certificate
E) Approved draft

Question 37

Which of the following is a draft with respect to which the drawer and drawee are the same bank or branches of the same bank?

A) Cashier's check
B) Traveler's check
C) Certified check
D) Check certificate
E) Approved draft

Question 38

The ancient ____, or law of merchants, of ______ recognized that agreements could be paid for with documents that promised payment and that these documents themselves could then be circulated as a substitute for money.

A) Lex mercatoria; England
B) Lax trade; England
C) Lex merchantia; France
D) Lax merchant; Italy
E) Lexi merchant; France

Question 39

With a[n] ______ instrument, the payee or subsequent holder can demand actual payment at any time.

A) Time
B) Demand
C) Recourse
D) Nonrecourse
E) Immediate

Question 40

What two characteristics must a written document have in order to satisfy the requirement that a negotiable instrument be in writing?

A) (1) relative permanence and (2) a signature by both parties.
B) (1) a signature at the end by the party to be charged and (2) movability.
C) (1) relative permanence and (2) acknowledgement.
D) (1) movability and (2) acknowledgement.
E) (1) relative permanence and (2) movability.

Question 41

Which of the following is true regarding whether an agent's signature may satisfy the requirement of negotiability that the signature of a maker or drawer appear?

A) A duly authorized agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability.
B) An agent's signature on behalf of his or her principal cannot bind the principal and does not satisfy the signature requirement for negotiability.
C) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if specific authorization from the principal allowing the agent to act on the specific transaction at issue is attached to the document.
D) A duly authorized agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if the instrument is for an amount over $1,000.
E) A duly authorized agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if the instrument is in an amount of $1,000 or less.

Question 42

If an instrument is silent as to the time of payment, which of the following is assumed by the UCC?

A) That it is a demand instrument
B) That it is a time instrument
C) That it is a void instrument
D) That it is a voidable instrument
E) That it is a nonnegotiable instrument

Question 43

"Book Payment." Molly and Pat signed a contract providing that "Pat will furnish the correct used business law book for use in Molly's business law class; and on August 15, 2013, Molly promises to pay Pat $50 for the book." Molly took the book and planned to pay Pat. Meanwhile, Pat properly assigned the contract Molly had signed to Jack. When Molly went to class, however, she discovered that the book was the incorrect book. When Jack asked Molly for payment, Molly refused. Molly told Jack that the book was useless to her and that she was not paying either him or Pat anything for it. Jack told Molly that he had an enforceable assignment in the form of a negotiable instrument and that he could collect regardless of whether the book was useless. Molly did not believe him. Since she was trying to save money on books, she also agreed to buy Tim's U.S. history book for $40. She had an oral agreement with Tim that he would give her the book and that she would pay him in three days. This time Molly got the right book. Tim, in writing, properly assigned the right to the $40 payment to Richard. Richard asked Molly for the money. Molly admitted her agreement with Tim but told Richard that she was not going to pay him because he did not have a negotiable instrument. Molly also purchased a communications book from Sam promising in writing to give him, to his order, a DVD she had in return the next day.

-Which of the following is true regarding Molly's assertion that Richard did not have a negotiable instrument?

A) Molly is incorrect, and the document by which Tim assigned the right to Richard is a negotiable instrument in regard to her duty to pay.
B) Molly is correct because her agreement with Tim was not in a writing containing words of negotiability.
C) Molly is correct because Richard was not a party to the original contract.
D) Molly is incorrect because her admission establishes the existence of a negotiable instrument between her and Tim that could be assigned to Richard.
E) Molly is correct because the amount at issue is insufficient to create a negotiable instrument.

Question 44

"Used Car Commission." William promised to sell Helen's car for her, but he wanted a commission of 10%. Helen signed an instrument promising to pay William a 10% commission if he sold her car. William assigned the agreement to Phil. Helen's car was sold and the buyer paid Helen. A dispute ensued between Helen and William regarding whether William found the buyer or the buyer found Helen. When Phil asked Helen for payment on the instrument, Helen refused. William, Helen, and Phil settled their dispute without going to court and Helen wrote Phil a check for $3,000. Phil endorsed the check on the back by signing his name planning to take it to the bank the next day. Unfortunately, Phil lost the check which was found by Helen and cashed by the local bank. Helen then left town.

-Which of the following is true regarding the instrument signed by Helen promising to pay William a 10% commission if he sold her car?

A) The instrument is negotiable.
B) The instrument is not negotiable only for the reason that it is based on a condition.
C) The instrument is not negotiable only for the reason that Helen is not a merchant.
D) The instrument is not negotiable only for the reason that it is not for a sum certain.
E) The instrument is not negotiable because it is based on a condition and also because it is not for a sum certain.

Question 45

Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

A) The instrument states a specific date for payment.
B) The instrument is dated and then states that "payment will be made 5 days after the above date."
C) An instrument that states that payments is due at a fixed time but may be extended at the election of the holder.
D) An instrument that states that "payment will be made 10 days after delivery of the goods."
E) An instrument that permits acceleration of payment and has a fixed date of payment if the acceleration clause is not affected.

Question 46

"Yard Mowing." Paula agreed to mow John's yard once a week for $50 per week throughout the summer. Paula, however, was having trouble getting her money from John. On one occasion, he in handwriting gave her in IOU saying "I, John Jones, owe Paula Smith $50." A couple of weeks later, John did not have the money to pay Paula what he owed her, and he handwrote the following on a piece of paper and gave it to her: "I, John Jones, promise to pay Paula Smith or to bearer, the sum of $100 on Monday, July 22, 2013." Paula quit mowing John's yard; and, disgusted with John, Paula assigned both documents to Vince. When Vince presented the documents to John, John refused to pay on the basis that after inspecting the yard, he decided that Paula was doing a poor job. Vince told him the documents constituted negotiable instruments, but John pointed out that he had not signed the documents with his signature at the end.

-Considering only the issue of terminology, not the issue of handwriting or whether Paula properly performed, which of the following is true regarding whether the language "I, John Jones, owe Paula Smith $50" is insufficient to establish elements required for a negotiable instrument?

A) The language is sufficient because it acknowledges the debt, and that is the only required standard.
B) The language is insufficient because it only acknowledges the debt and is not a promise to pay.
C) The language is sufficient only because the instrument is in an amount under $500.
D) The language is sufficient because it acknowledges the debt and is also a promise to pay.
E) The language is sufficient because it acknowledges the debt and is unconditional.

Question 47

Which of the following is true regarding an IOU instrument containing the language "payable on demand"?

A) The instrument is not negotiable because it does not contain an unconditional promise or order to pay, but it may be an enforceable contract.
B) The instrument contains an unconditional promise to pay; and, therefore, the fact that it is an IOU instrument does not affect negotiability.
C) The instrument contains an unconditional promise to pay but nevertheless is not negotiable because it is an IOU instrument.
D) The instrument is not negotiable because the words "payable on demand" are included; otherwise, the IOU instrument would contain an unconditional promise to pay.
E) The instrument is not negotiable, nor could it be an enforceable contract, because it does not contain an unconditional promise to pay.

Question 48

Negotiable instruments payable to whoever is bearing them are known as ______ instruments.

A) Demand
B) Order
C) Transactional
D) Bearer
E) Payor

Question 49

"Book Payment." Molly and Pat signed a contract providing that "Pat will furnish the correct used business law book for use in Molly's business law class; and on August 15, 2013, Molly promises to pay Pat $50 for the book." Molly took the book and planned to pay Pat. Meanwhile, Pat properly assigned the contract Molly had signed to Jack. When Molly went to class, however, she discovered that the book was the incorrect book. When Jack asked Molly for payment, Molly refused. Molly told Jack that the book was useless to her and that she was not paying either him or Pat anything for it. Jack told Molly that he had an enforceable assignment in the form of a negotiable instrument and that he could collect regardless of whether the book was useless. Molly did not believe him. Since she was trying to save money on books, she also agreed to buy Tim's U.S. history book for $40. She had an oral agreement with Tim that he would give her the book and that she would pay him in three days. This time Molly got the right book. Tim, in writing, properly assigned the right to the $40 payment to Richard. Richard asked Molly for the money. Molly admitted her agreement with Tim but told Richard that she was not going to pay him because he did not have a negotiable instrument. Molly also purchased a communications book from Sam promising in writing to give him, to his order, a DVD she had in return the next day.

-Which of the following is true regarding Jack's claim that he had a negotiable instrument and could collect from Molly?

A) Jack is correct.
B) The agreement is not negotiable because it does not contain words of negotiability.
C) The agreement is not negotiable because the book was the wrong book.
D) The agreement is not negotiable because Jack was not a party to the original contract.
E) The agreement is not negotiable both because the amount at issue is insufficient to create a negotiable instrument.

Question 50

"Book Payment." Molly and Pat signed a contract providing that "Pat will furnish the correct used business law book for use in Molly's business law class; and on August 15, 2013, Molly promises to pay Pat $50 for the book." Molly took the book and planned to pay Pat. Meanwhile, Pat properly assigned the contract Molly had signed to Jack. When Molly went to class, however, she discovered that the book was the incorrect book. When Jack asked Molly for payment, Molly refused. Molly told Jack that the book was useless to her and that she was not paying either him or Pat anything for it. Jack told Molly that he had an enforceable assignment in the form of a negotiable instrument and that he could collect regardless of whether the book was useless. Molly did not believe him. Since she was trying to save money on books, she also agreed to buy Tim's U.S. history book for $40. She had an oral agreement with Tim that he would give her the book and that she would pay him in three days. This time Molly got the right book. Tim, in writing, properly assigned the right to the $40 payment to Richard. Richard asked Molly for the money. Molly admitted her agreement with Tim but told Richard that she was not going to pay him because he did not have a negotiable instrument. Molly also purchased a communications book from Sam promising in writing to give him, to his order, a DVD she had in return the next day.

-What is the effect of Molly agreeing to give Sam a DVD in return for the book?

A) Molly and Sam have an enforceable contract, and Molly has also satisfied the negotiability condition regarding the form of payment.
B) Molly and Sam have an enforceable contract, but the agreement fails to satisfy the negotiability requirement that payment be in a sum certain in money.
C) Because payment is not in a sum certain for money, Molly and Sam do not have an enforceable contract nor does the agreement satisfy the negotiability requirement that payment be in a sum certain in money.
D) Because payment is not in a sum certain for money, Molly and Sam do not have an enforceable contract, but the requirement of negotiability regarding the form of payment has been satisfied.
E) Unless Sam acknowledges in writing that the fair market value of the DVD is equivalent to the value of the book he provided to Molly, there is no enforceable contract nor is the agreement negotiable.

Question 51

Before Phil endorsed the check it was a[n] ______ instrument; and after he endorsed it, the check was a[n] _____ instrument.

A) Order; order
B) Order; transactional
C) Order; bearer
D) Transactional; bearer
E) Bearer; bearer

Question 52

Which of the following is true regarding negotiable instruments as compared to contracts?

A) Similar to contracts, negotiable instruments require consideration.
B) Similar to contracts, negotiable instruments require offer and acceptance; but unlike contracts, negotiable instruments do not require consideration.
C) A negotiable instrument is a form of a contract and may be referred to as such.
D) Negotiable instruments lack the requirements of contracts involving consideration, offer, and acceptance.
E) Negotiable instruments require the same elements as contracts in regard to consideration, offer and acceptance.

Question 53

Under the UCC which of the following statements is sufficient to make a promise or order to pay conditional?

A) "I promise to pay from the corporate account."
B) "I promise to pay as per the contract for the sale of goods between the parties."
C) "I promise to pay because I owe the money."
D) "I promise to pay if the following occurs."
E) "Borrower may pay without penalty all or a portion of the amount owed earlier than it is due."

Question 54

When is a demand instrument, such as a check, payable?

A) As soon as it is issued.
B) Twenty-four hours after it is issued.
C) Two days after it is issued.
D) At midnight the day it is issued.
E) One hour after it is issued.

Question 55

"Yard Mowing." Paula agreed to mow John's yard once a week for $50 per week throughout the summer. Paula, however, was having trouble getting her money from John. On one occasion, he in handwriting gave her in IOU saying "I, John Jones, owe Paula Smith $50." A couple of weeks later, John did not have the money to pay Paula what he owed her, and he handwrote the following on a piece of paper and gave it to her: "I, John Jones, promise to pay Paula Smith or to bearer, the sum of $100 on Monday, July 22, 2013." Paula quit mowing John's yard; and, disgusted with John, Paula assigned both documents to Vince. When Vince presented the documents to John, John refused to pay on the basis that after inspecting the yard, he decided that Paula was doing a poor job. Vince told him the documents constituted negotiable instruments, but John pointed out that he had not signed the documents with his signature at the end.

-Disregarding the issue of whether Paula properly performed, is the statement "I, John Jones, promise to pay Paula Smith or to bearer, the sum of $100 on Monday, July 22, 2008," without a signature anywhere else on the document, sufficient to satisfy the signature requirement of negotiability?

A) Yes, because it contains an unconditional promise to pay; and in the handwritten promise, the maker wrote his own name.
B) Yes, it is sufficient regardless of whether it is in handwriting or not because it contains an unconditional promise to pay.
C) No, because it was not signed at the bottom.
D) Yes, but only if John later signed another document confirming that he meant the handwritten statement to constitute his signature.
E) No, because it was not signed at the bottom or anywhere else on the document.

Question 56

"Yard Mowing." Paula agreed to mow John's yard once a week for $50 per week throughout the summer. Paula, however, was having trouble getting her money from John. On one occasion, he in handwriting gave her in IOU saying "I, John Jones, owe Paula Smith $50." A couple of weeks later, John did not have the money to pay Paula what he owed her, and he handwrote the following on a piece of paper and gave it to her: "I, John Jones, promise to pay Paula Smith or to bearer, the sum of $100 on Monday, July 22, 2013." Paula quit mowing John's yard; and, disgusted with John, Paula assigned both documents to Vince. When Vince presented the documents to John, John refused to pay on the basis that after inspecting the yard, he decided that Paula was doing a poor job. Vince told him the documents constituted negotiable instruments, but John pointed out that he had not signed the documents with his signature at the end.

-Which of the following is true regarding the effect on negotiability of John's determination that Paula did a poor job mowing the yard?

A) Paula's performance prevents the instruments from being negotiable only if John meets the burden of proof of establishing to the judge by a preponderance of the evidence that Paula did a poor job mowing the yard.
B) Paula's performance prevents the instruments from being negotiable only if Paula meets the burden of proof of establishing to the judge by a preponderance of the evidence that she did an acceptable job mowing the yard.
C) Paula's performance prevents the instruments from being negotiable only if John meets the burden of proof of establishing to the judge by a preponderance of the evidence that Paula did a poor job mowing the yard, and if Paula signed and provided to John a document agreeing that the instrument would lack negotiability unless she properly performed.
D) Paula's performance prevents the instruments from being negotiable only if Paula meets the burden of proof of establishing to the judge by a preponderance of the evidence that she did an acceptable job mowing the yard and that she did not sign any document agreeing that the instrument would lack negotiability upon John's objection.
E) Manner of performance is not one of the listed elements for a finding of negotiability.

Question 57

When a specific payee is named in an instrument, the instrument is known as a[n] _____ instrument.

A) Demand
B) Order
C) Transactional
D) Bearer
E) Payor

Question 58

Which of the following is true regarding the type of currency needed to satisfy the currency requirement for negotiability in this country?

A) U.S. dollars is the only satisfactory currency
B) U.S. dollars or English pounds are the only satisfactory currency
C) U.S. dollars, English pounds, or Euros are the only satisfactory currency
D) U.S. dollars, English pounds, Euros, and Japanese yen are all satisfactory currency
E) U.S. dollars, English pounds, Euros, Japanese yen, and gold are all satisfactory currency

Question 59

"Yard Mowing." Paula agreed to mow John's yard once a week for $50 per week throughout the summer. Paula, however, was having trouble getting her money from John. On one occasion, he in handwriting gave her in IOU saying "I, John Jones, owe Paula Smith $50." A couple of weeks later, John did not have the money to pay Paula what he owed her, and he handwrote the following on a piece of paper and gave it to her: "I, John Jones, promise to pay Paula Smith or to bearer, the sum of $100 on Monday, July 22, 2013." Paula quit mowing John's yard; and, disgusted with John, Paula assigned both documents to Vince. When Vince presented the documents to John, John refused to pay on the basis that after inspecting the yard, he decided that Paula was doing a poor job. Vince told him the documents constituted negotiable instruments, but John pointed out that he had not signed the documents with his signature at the end.

-What is the effect of the instruments being written by hand?

A) Handwriting does not prevent the instruments from being considered negotiable only because neither Paula nor John would be considered merchants in the transactions at issue.
B) Handwriting does not prevent the instruments from being considered negotiable only because John would not be considered a merchant in the transaction at issue, and Paula's status as a merchant is irrelevant.
C) Handwriting does not prevent the instrument from being considered negotiable only because Paula would not be considered a merchant in the transaction at issue, and John's status as a merchant is irrelevant.
D) Handwriting does not prevent the IOU instrument from being negotiable, but it does prevent the other instrument from being negotiable.
E) The issue of the instruments being handwritten does not prevent either from being considered negotiable.

Question 60

For an instrument to be negotiable, the instrument must indicate that it was created for the purpose of being ____.

A) Transferred
B) Paid
C) Maintained
D) Banked
E) Retained

Question 61

What is the difference between a demand instrument and a time instrument?

Question 62

Set forth the definition of a traveler's check.

Question 63

Anne orally promises Judy that in return for Judy washing Anne's dog, Anne unconditionally promises to pay Judy $50 the next Wednesday. Is a contract formed, is it negotiable, and why or why not?

Question 64

Set forth the seven requirements for an instrument to be negotiable.

Question 65

Set forth the two exceptions to the time-certain requirement for negotiability discussed in the text.

Question 66

Which of the following is the most likely result if Phil attempts to require that the bank reimburse him for the value of the check cashed by Helen?

A) The check was an order instrument, and the bank must take the loss because it should only have provided funds to Phil.
B) Because the check was an order instrument, the bank was within its rights to pay Helen because she presented the check; and Phil has no rights against the bank.
C) Because the check was a bearer instrument, the bank must take the loss because it should only have provided the funds to Phil.
D) Because the check was a bearer instrument, the bank was authorized to pay Helen; and Phil has no rights against the bank.
E) Regardless of what type of instrument the check was, the bank had no right to cash the check when presented by Helen unless the bank can establish by a preponderance of the evidence that Helen misrepresented herself as an agent of Phil.