Question 1

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.

Accepted Answer

A reference to the mere existence of another agreement does not affect negotiability because it merely describes the consideration and transaction giving rise to the instrument. However, if a right to payment is made "subject to" the terms of another agreement, the instrument is not negotiable. This restriction against making an instrument subject to another agreement is to enable any person to determine the right to payment provided by the instrument without having to look beyond its four corners.

Question 2

Handwritten words supersede typewritten words contained in negotiable instruments.

Accepted Answer

A) True 
 B)False  True

Question 3

An instrument is payable to order if it is payable:

Accepted Answer

A)   to the order of an identified person.
B)   to an identified person or order.
C)   Both of these.
D)   Neither of these. C

Question 4

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

Accepted Answer

A)   Payable on or before January 2, 2015.
B)   Payable one year from the completion of the building
C)   Payable one week after demand is made.
D)   Payable on June 15, 2014 or, if the building is not complete on that date, one year from that date.

Question 5

Expain whether each of the following would be negotiable or not negotiable. 
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."

Accepted Answer

The answer of Expain whether each of the following would...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would be a bearer instrument?

Accepted Answer

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)   A check payable to "cash" or a   check that says "pay to the order of bearer."

Question 9

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

Accepted Answer

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 the maker is always a bank  and the payee of a CD must be paid on demand .

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

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

Question 12

Revised Article 1 of the UCC states that the "money" requirement for a negotiable instrument means the current official currency of the government, not just a medium of exchange authorized or adopted by a sovereign government as part of its currency.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Under the Check 21 Act:

Accepted Answer

A)   banks must accept checks in electronic form.
B)   banks are permitted to truncate original checks and process check information electronically.
C)   banks must create substitute checks which are the legal equivalent of the original checks.
D)   All of these.

Question 15

The vital importance of negotiable instruments and electronic transfers as methods of payment cannot be overstated.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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 17

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?

Accepted Answer

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 18

To have the full benefit of negotiability, negotiable instruments must:

Accepted Answer

A)   meet the requirements of negotiability.
B)   meet the requirements of negotiability and be acquired by a party who notified the maker or drawer of the transfer.
C)   be acquired by a holder in due course.
D)   Both meet the requirements of negotiability  and also  be acquired by a holder in due course.

Question 19

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

Accepted Answer

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 these.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 24: Form and Content

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.

Handwritten words supersede typewritten words contained in negotiable instruments.

An instrument is payable to order if it is payable:

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

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

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

Which of the following would be a bearer instrument?

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

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

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

Revised Article 1 of the UCC states that the "money" requirement for a negotiable instrument means the current official currency of the government, not just a medium of exchange authorized or adopted by a sovereign government as part of its currency.

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

Under the Check 21 Act:

The vital importance of negotiable instruments and electronic transfers as methods of payment cannot be overstated.

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

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?

To have the full benefit of negotiability, negotiable instruments must:

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

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