Deck 24: B: The Function Creation of Negotiable Instruments

Question 1

A signature can consist of a word,mark,or symbol.

Answer 1

True

Question 2

A certificate of deposit is a type of note.

Answer 2

True

Question 3

A negotiable instrument can function as a substitute for cash.

Answer 3

True

Question 4

An instrument payable "with interest" must specify a particular rate to be negotiable.

Question 5

For an instrument to be negotiable,it need not be signed.

Question 6

To be negotiable,an instrument must have conditional promises attached to it.

Question 7

An instrument is not negotiable if it is not payable at a definite time.

Question 8

For an instrument to be negotiable,it must be in writing.

Question 9

An undated instrument is not negotiable.

Question 10

A promissory note payable to "bearer" is not negotiable.

Question 11

A mere reference in an instrument to another writing makes the promise or order conditional.

Question 12

A statement in an instrument that payment can be made only out of a particular fund or source renders it nonnegotiable.

Question 13

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

Question 14

For an instrument to be negotiable,it must not contain an express promise or order to pay.

Question 15

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

Question 16

A check is a time instrument because it is payable in due time.

Question 17

To be negotiable,an order to pay must be addressed to only one person.

Question 18

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

Question 19

To be negotiable,an instrument must not be on material that lends itself to permanence.

Question 20

A time draft is payable at a definite future time.

Question 21

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

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 22

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

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

Question 23

Rita owes $6,000 in unpaid taxes.In the sand of Seaside Beach,she exe?cutes an instrument for that amount that otherwise meets the re?quire?ments for negotiability.This instrument is likely

A)negotiable.
B)nonnegotiable,because an instrument must be on paper.
C)nonnegotiable,because sand is not sufficiently permanent.
D)nonnegotiable,because the government does not appreciate it.

Question 24

On behalf of Digital Cable Company,Elvin signs an instrument in which he promises to deliver 1,000 feet of optic fiber cable to Financiers eBank on March 1.This instrument is

A)negotiable.
B)nonnegotiable,because cable is not a medium of exchange author?ized or adopted by a government as currency.
C)nonnegotiable,because it does not indicate a specific type of cable.
D)nonnegotiable,because it does not recite any consideration.

Question 25

Shad signs a promissory note payable to Theresa "with interest" on which he conspicuously notes that it is "nonnegotiable." This instru?ment is

A)negotiable.
B)nonnegotiable,because it includes the notation "nonnegotiable."
C)nonnegotiable,because it does not specify a rate of interest.
D)nonnegotiable,because the exact amount payable cannot be deter?mined from the face of the instrument.

Question 26

Fact Pattern 24-1A
Flik draws a check payable to "DeliMart" to buy groceries.
Refer to Fact Pattern 24-1A.With respect to Flik's check,DeliMart is

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

Question 27

Ryan signs an instrument using an "R" with a circle around it.With this mark for a signature,the instrument is

A)negotiable.
B)nonnegotiable,because an initial does not state the signer's name.
C)nonnegotiable,because this mark is a symbol,not a signature.
D)nonnegotiable,because a simple mark implies a lack of serious intent.

Question 28

Rainey signs a promissory note for $10,000 in favor of State University (SU).The note is undated but specifies that it is "payable one month after date." This note is

A)negotiable.
B)nonnegotiable,because one month is not a reasonable time.
C)nonnegotiable,because there is no option to pay early.
D)nonnegotiable,because the maturity date cannot be deter?mined from the face of the instrument.

Question 29

On May 1,Doug signs a check that is payable to the order of Employees Credit Corporation and that is dated July 1.This check is

A)negotiable.
B)nonnegotiable,because it is payable to a corporation.
C)nonnegotiable,because it is postdated.
D)nonnegotiable,because it is signed by the drawer.

Question 30

To finance the purchase of a house from Tuna,Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10,2042.To be negotiable,this instrument must include the signature of

A)a non-party witness.
B)Tuna or Tuna's realtor.
C)Uri.
D)Verity's chief financial officer.

Question 31

To finance the purchase of a car from Giant Auto Sales,Hoppy signs an instrument promising to pay to "Ideal Credit Union" $18,000 with interest in installments with the final payment due May 15,2014.To be negotiable,this instrument must include on its face

A)any conditions on the sale of the car.
B)any conditions to the disbursement of the funds.
C)any conditions to the repayment of the loan.
D)no conditions.

Question 32

Fact Pattern 24-2A
Commodity Sales Corporation and Resource Purchasing Company enter a contract for a sale of unprocessed silver.Commodity Sales draws a draft unconditionally ordering Resource Purchasing to pay $50,000 to Commodity Sales's order in sixty days.Resource Purchasing signs and dates the draft.
Refer to Fact Pattern 24-2A.On this instrument,Commodity Sales is

A)the banker.
B)the drawer.
C)the maker.
D)the trader.

Question 33

Karen writes on a piece of paper,"I owe you $600," signs it,and gives it to Lou.This instrument is

A)negotiable.
B)nonnegotiable,because it does not include an express promise to pay.
C)nonnegotiable,because it does not recite any consideration.
D)nonnegotiable,because it does not state any conditions to payment.

Question 34

Fact Pattern 24-2A
Commodity Sales Corporation and Resource Purchasing Company enter a contract for a sale of unprocessed silver.Commodity Sales draws a draft unconditionally ordering Resource Purchasing to pay $50,000 to Commodity Sales's order in sixty days.Resource Purchasing signs and dates the draft.
Refer to Fact Pattern 24-2A.This instrument is

A)a banker's acceptance.
B)a nonnegotiable instrument.
C)a promissory note.
D)a trade acceptance.

Question 35

Locke signs a check payable to the order of Metro 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

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

Question 36

Fact Pattern 24-1A
Flik draws a check payable to "DeliMart" to buy groceries.
Refer to Fact Pattern 24-1A.Flik's check is most likely

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

Question 37

Kelly signs an instrument in favor of Leo that states it is "subject to a cer?tain agreement between Kelly and Mona." This instru?ment is

A)negotiable.
B)nonnegotiable,because it is made subject to a separate agreement.
C)nonnegotiable,because it refers to a separate agreement.
D)nonnegotiable,because Kelly and Mona are not the same persons.

Question 38

Bagels n' Coffee Café issues an instrument in favor of Eatery Supplies,Inc.For the instrument to be negotiable,it must

A)be a conditional promise or order to pay.
B)be payable on demand or at a specific time.
C)be signed by the payee.
D)recite the consideration given in exchange for it.

Question 39

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

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 40

To obtain office supplies for Doctors Medical Clinic,Elmo executes a draft in favor of Flynn.A draft is

A)a conditional promise to pay money.
B)an unconditional written order to pay money.
C)a qualified promise to set aside a sum of money.
D)a restricted promise to deliver goods at a future date.

Question 41

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?

Question 42

The accounting department of Delta Sales Company receives an instru?ment that states,"March 16,2011.Thirty days after date,I promise to pay to the order of cash,$700 (seven hundred and 00/100 dollars),in Denver,Colorado,with interest at the rate of 7% (seven percent)per year.This in?strument is secured by a contract for the sale of a computer.Due April 15,2011.[Signed] Edward Jones." What type of instrument is this? Is it nego?tiable? If not,why not?