Question 1

Bob signs his name on the back of a cheque he is receiving,indicating a special endorsement to Charles.However,assuming Charles and Bob have never met and do not know one another,Charles is reluctant to purchase that cheque from Bob.If a third party became involved to help bring assurance to the transaction,which of the following statements would most likely be written by the third party?

Accepted Answer

A)  For deposit only
B)  Guarantor for Bob
C)  Pay to Bob
D)  Bob hereby identified
E)  Pay to Bob without recourse D

Question 2

Beryl opened a chequing account at the Bank of Banff.As part of that transaction,she deposited ten $100 bills into her new chequing account.Technically speaking,she continues to own those bills until she writes a cheque on her account.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following statements is TRUE with respect to notice of dishonour?

Accepted Answer

A)  Notice of dishonour only needs to be provided against a party that did not endorse an instrument.
B)  In some circumstances,an endorser may be held liable even if it did not actually receive notice of dishonour following the dishonour of a cheque.
C)  Notice of dishonour is significant mainly because it relieves the drawee of a cheque of liability.
D)  Once notice of dishonour is given to one endorser,it is automatically effective against all prior endorsers.
E)  To be effective,notice of dishonour normally can be provided any time within six months of dishonour. B

Question 4

Analee bought a widget from Nathan.On March 1,she paid the purchase price by giving him a promissory note for $100 000.The entire payment is due on June 1.The note contains an acceleration clause.Consequently,Nathan has the absolute right to receive payment before June 1 if he wants.

Accepted Answer

A) True 
 B)False

Question 5

Jordan bought a widget from Sara.He paid the purchase price of $25 000 by giving her a cheque drawn upon his account at the Bank of Saskatoon.The facts involve three contracts.Identify those contracts and briefly explain the rights that each involves.

Accepted Answer

The answer of Jordan bought a widget from Sara.He paid...

Question 6

Martina bought a necklace from Roland.The price of the necklace was $10 000.Martina promised Roland that she would pay that amount to him.As part of the same transaction,she also gave him a cheque for that amount.Roland later bought a painting from Astral Gallery Inc.The price of the painting was $10 000.Which of the following statements is TRUE?

Accepted Answer

A)  Roland can pay for the painting by negotiating the cheque to Astral Gallery only if Astral Gallery and Martina have accounts with the same bank.
B)  Roland could pay for the painting by negotiating the cheque to Astral Gallery,but he could not pay by assigning to Astral Gallery the rights that he has against Martina under the earlier sales contract.
C)  Roland could pay for the painting by cashing the cheque and delivering the money to Astral Gallery,but he could not simply negotiate to Astral Gallery the cheque that he had received from Martina.
D)  If given a choice,Astral Gallery would probably prefer to receive an assignment of the rights that Roland has against Martina under the earlier sales contract,rather than negotiation of Martina's cheque.
E)  Roland is entitled to recover $10 000 from Martina under their sales contract or $10 000 from her on the basis of her cheque,but not both.

Question 7

Identify two types of endorsements that may be used by a person who is not the holder of a negotiable instrument.Provide an example of each.

Accepted Answer

The answer of Identify two types of endorsements that may...

Question 8

Shoshanna drafted a complete cheque and made it payable to bearer.She placed it in her desk drawer.She intended to give it as a prize to whichever student achieved the highest grade in her business law class.The cheque was stolen.After passing through several hands,it came into Ethan's possession.Which of the following statements is TRUE?

Accepted Answer

A)  Ethan can enforce the cheque against Shoshanna if he is a holder.
B)  Ethan can enforce the cheque against Shoshanna if he is a holder in due course and there is no real defense.
C)  Shoshanna merely has a personal defence as a result of the theft.
D)  Shoshanna has a real defence as a result of the theft.
E)  Ethan can enforce the cheque against Shoshanna because he has possession of the cheque and therefore is considered an immediate party.

Question 9

When writing a cheque made out to Austin,Walter left visible spaces between the numbers when he wrote them down.As a result,Austin added an extra 7 in between two of the numbers on the cheque costing Walter $7000 more than he intended to be withdrawn from his chequing account.Which of the following is true?

Accepted Answer

A)  Since the alteration was caused by Walter's carelessness,the bank is entitled to take the extra $7000 from the account.
B)  The bank is never entitled to take extra money despite carelessness.
C)  Real defenses only apply to forgery and minority,never to material alterations.
D)  A defect in title defense claim will arise.
E)  A personal defense claim will arise.

Question 10

Alpha Corp appears to be the named payee of a cheque drawn by Ultimate Inc.Ultimate,however,insists that that piece of paper cannot possibly be treated as a valid cheque under the Bills of Exchange Act.That is TRUE if

Accepted Answer

A)  the instrument was certified before being delivered.
B)  the instrument had been materially altered after being drafted.
C)  the instrument is drawn on Lester,who is the major shareholder of ultimate.
D)  payment is to be made from an overdrawn account.
E)  the instrument is postdated.

Question 11

Maxim received a cheque that was specially endorsed to him under several conditions.Alexa then acquired that same cheque from Maxim under the same conditions,and Tori then acquired it from Alexa with those same conditions.Albert was the last and final person to acquire the cheque which he received from Tori with the same conditions attached.If none of the individuals listed above were involved with fraudulent or illegal activity,which of them other than Maxim were holders in due course?

Accepted Answer

A)  Alexa only
B)  Alexa,Tori
C)  Alexa,Tori,Albert
D)  Albert only
E)  Tori,Albert

Question 12

Jacob Benito runs a business based in Norway that sells the steel used in hockey blades.Jacob sold $50 000 worth of steel to Wayne Lemieux of Canada on August 8,2006.The two parties agreed that the $50 000 would not be due until October 8,2006 and Wayne arranged for the payment to be made through his line of credit at ABC Trust Company.Which of the following is true?

Accepted Answer

A)  Jacob is the payee,Wayne is the drawer,and ABC is the drawee.
B)  Jacob is the drawee,Wayne is the drawer,and ABC is the payee.
C)  Jacob is the drawee,Wayne is the payee,and ABC is the drawer.
D)  Jacob is the payee,Wayne is the drawee,and ABC is the drawer.
E)  Jacob is the payee,Wayne is the drawee,and ABC is the other payee.

Question 13

On June 1,Rituparna bought a widget from Joel.The price was $75 000.On that same day,she gave him a bill of exchange for that amount that was drawn on the Bank of Brandon.Which of the following statements is TRUE?

Accepted Answer

A)  Rituparna is the drawee,Joel is the payee,and the Bank of Brandon is the acceptor.
B)  A bill of exchange must be payable on demand.
C)  The Bank of Brandon owes Rituparna a legal duty to accept the bill if Joel's account balance is at least $75 000.
D)  Unlike a cheque,a bill of exchange is automatically considered to be certified unless the relevant account is overdrawn.
E)  June 1 is not necessarily the due date.

Question 14

Natalia has a chequing account at the Bank of Victoria.It contains a balance of $3000.Natalia bought a scooter from Edgar for $1000.He wants to have a cheque in bearer form.That desire can be achieved if

Accepted Answer

A)  Natalia persuades a friend to add an accommodation endorsement.
B)  the cheque contains a special endorsement.
C)  Natalia creates a cheque and leaves the amount blank.
D)  Edgar persuades a banker to add a qualified endorsement.
E)  Natalia makes a cheque payable to Edgar and he then puts a blank endorsement on the back of it.

Question 15

A document may be a negotiable instrument even if it does not satisfy the requirements of the Bills of Exchange Act.

Accepted Answer

A) True 
 B)False

Question 16

When Lance made a cheque payable to Giorgio and handed it to him,he noticed Giorgio signed his own name on the back of that cheque and indicated the money be paid to Derek Shallins.Which of the following has occurred?

Accepted Answer

A)  A qualified endorsement was created.
B)  An invalid cheque was created.
C)  A special endorsement was created.
D)  A general endorsement was created.
E)  A restrictive endorsement was created.

Question 17

The Bills of Exchange Act and the Sale of Goods Act both arose as codifications of judge-made rules.Furthermore,the original legislation in each case was intended to increase certainty and efficiency in the commercial world.There is,however,a major difference between the two statutes.One generally provides default rules that the parties are free to accept or reject.The other does not allow the parties to freely opt in and out of its sections.Which of the two statutes is less flexible and why?

Accepted Answer

The answer of The Bills of Exchange Act and the...

Question 18

Identify and briefly explain three major differences between a negotiable instrument and a regular contract.

Accepted Answer

The answer of Identify and briefly explain three major differences...

Question 19

Melinda is the holder in due course of a cheque drawn on Tyson's bank account.She therefore believes that she is entitled to receive payment from Tyson.Tyson,however,believes that he has a good defence to her claim.That will be TRUE if Tyson can prove the defence of

Accepted Answer

A)  minority
B)  drunkenness.
C)  non-delivery of a completed cheque.
D)  no authority.
E)  failure of consideration.

Question 20

Tara created a cheque for $5000 that was payable to bearer.She delivered it to Simon.Simon negotiated it to Melanie,who then negotiated it to Oscar,who then negotiated it to Mike.While Melanie had possession of the cheque,she altered it so that it now appears to be a cheque for $25 000.Which of the following statements is TRUE?

Accepted Answer

A)  Mike is entitled to receive $50 000 from Tara as long as Melanie acted in good faith.
B)  If the alteration is apparent to the naked eye,the drawee bank would be entitled to debit $25 000 from Tara if she carelessly facilitated the alteration when she drafted the cheque.
C)  If the alteration is not apparent to the naked eye,Mike is entitled to receive $50 000 from Oscar.
D)  If the alteration is apparent to the naked eye,Mike is entitled to receive payment from Tara.
E)  If the alteration is not apparent to the naked eye,Mike is entitled to receive $5000 from Tara if she did not carelessly facilitate the alteration when she drafted the cheque.

Exam 14: Special Contracts: Negotiable Instruments