Question 1

One of the basic requirements for an instrument to be negotiable is that it must be payable:

Accepted Answer

A)   to a specific person.
B)   in cash or kind.
C)   "to order" or "to bearer."
D)   on fulfillment of a conditional promise.

Question 2

An instrument does not qualify as a check if it is described on its face by another term such as "money order."

Accepted Answer

A) True 
 B)False  False

Question 3

What is the difference between a promissory note and a check? Why is the distinction important?

Accepted Answer

A promissory note is the simplest form o...

Question 4

A term authorizing the confession of judgment on an instrument when it is due affects the negotiability of the instrument.

Accepted Answer

A) True 
 B)False

Question 5

An instrument that meets all of the formal requirements for negotiability is not a negotiable instrument if it is unenforceable or uncollectible for other reasons.

Accepted Answer

A) True 
 B)False

Question 6

Commercial paper cannot be used as a means of extending credit.

Accepted Answer

A) True 
 B)False  False

Question 7

If an instrument is nonnegotiable,_____.

Accepted Answer

A)   the Uniform Commercial Code controls the rights, and the general rules of property law control liabilities of the parties involved
B)   the general rules of contract law control the rights and liabilities of the parties involved
C)   the Uniform Commercial Code controls the rights, and the general rules of comparative law control the liabilities of the parties involved
D)   the general rules of tort law control the rights and liabilities of the parties involved

Question 8

A teller's check is a:

Accepted Answer

A)   draft drawn by a bank on any other financial institutions other than a bank.
B)   check drawn by a bank on an individual's funds.
C)   draft on which the drawer or drawee are the same bank.
D)   draft drawn by a bank on another bank or payable at or through a bank.

Question 9

A promise or order is "payable on demand" if it states that it is payable:

Accepted Answer

A)   only to the bearer.
B)   on a particular date.
C)   on the fulfillment of a condition.
D)   at the will of the holder of the instrument.

Question 10

The attribute of negotiability means that commercial paper can be readily transferred and accepted as a substitute for money.

Accepted Answer

A) True 
 B)False

Question 11

Carlos borrowed $100 from his friend,Juanita.Carlos signed a handwritten note stating,"I promise to pay $100 to the order of Juanita." Under these circumstances,the note is _____.

Accepted Answer

A)   negotiable because it is a simple contract
B)   not negotiable because it does not acknowledge the reason for the debt
C)   not negotiable because it does not state the time payment is due
D)   negotiable because it meets all the requirements for negotiability

Question 12

A check is a draft payable on demand and drawn on a bank.

Accepted Answer

A) True 
 B)False

Question 13

Identify the statement that holds true of revised Article 3 of the Uniform Commercial Code regarding checks.

Accepted Answer

A)   Under revised Article 3, an instrument does not qualify as a check if it contains the engraving "money order" on its face.
B)   Revised Article 3 prevents an instrument from meeting the "unconditional promise" if it requires a countersignature of a person whose specimen signature appears on the draft.
C)   Under revised Article 3, a payor bank may pay a postdated check before the stated date unless the drawer has notified the bank of postdating pursuant to a procedure set out in the Code.
D)   Revised Article 3 states that an instrument which names a fixed time for payment should not contain a clause permitting the time for payment to be accelerated at the option of the maker.

Question 14

If an instrument is undated,its "date" is the date it is issued by the maker or drawer.

Accepted Answer

A) True 
 B)False  True

Question 15

Which of the following statements is true of signing a negotiable instrument?

Accepted Answer

A)   An instrument in the form of a note must be signed by the payee who accepts the promise of the issuer.
B)   An instrument in the form of a draft must be signed by the person giving the instruction to pay.
C)   An instrument is not considered to be negotiable when the maker signs by writing his name on it.
D)   A person or company cannot authorize an agent to sign instruments for it.

Question 16

A two-party instrument in which one person makes an unconditional promise in writing to pay another person,with or without interest,either on demand or at a specified,future time is a _____.

Accepted Answer

A)   promissory note
B)   certificate of deposit
C)   draft
D)   check

Question 17

A draft is a:

Accepted Answer

A)   two-party instrument.
B)   three-party instrument.
C)   single-party instrument.
D)   non-negotiable instrument.

Question 18

Nigel,a resident of North Carolina,sent Claude,a resident of Lyon,France,a note that read,"Ninety days after date,I promise to pay to the order of Claude €5,000 (signed) Nigel." The note is:

Accepted Answer

A)   payable in an equivalent dollar amount.
B)   not payable in the foreign money specified.
C)   payable on demand in the foreign money specified.
D)   payable at sight in an equivalent dollar amount.

Question 19

Which of the following is true of the negotiability of a written instrument?

Accepted Answer

A)   The Uniform Commercial Code considers only instruments that are handwritten as negotiable.
B)   An instrument written on a piece of wrapping paper will be considered a poor business practice and will not be negotiable.
C)   The writing of an instrument does not have to be on any particular material; all that is required is that it be in writing to be negotiable.
D)   An instrument written in pencil does not qualify as a negotiable instrument.

Question 20

Ricardo borrowed $5,000 from his friend,Lorenzo.Ricardo signed a handwritten note stating,"I promise to pay $5,000 to Lorenzo on or before August 1,2001,in return for the same amount borrowed from him on May 1,2001." Under these circumstances,the note is _____.

Accepted Answer

A)   negotiable because it was handwritten
B)   not negotiable because the note states the reason for the debt
C)   not negotiable because the note is not payable to bearer or to order
D)   negotiable because it is a simple contract

Exam 38: Negotiable Instruments

One of the basic requirements for an instrument to be negotiable is that it must be payable:

Correct AnswerverifiedShow Answer

An instrument does not qualify as a check if it is described on its face by another term such as "money order."

Correct AnswerverifiedFalse

What is the difference between a promissory note and a check? Why is the distinction important?

Correct AnswerverifiedA promissory note is the simplest form o...View AnswerShow Answer

A term authorizing the confession of judgment on an instrument when it is due affects the negotiability of the instrument.

Correct AnswerverifiedShow Answer

An instrument that meets all of the formal requirements for negotiability is not a negotiable instrument if it is unenforceable or uncollectible for other reasons.

Correct AnswerverifiedShow Answer

Commercial paper cannot be used as a means of extending credit.

Correct AnswerverifiedFalse

If an instrument is nonnegotiable,_____.

Correct AnswerverifiedShow Answer

A teller's check is a:

Correct AnswerverifiedShow Answer

A promise or order is "payable on demand" if it states that it is payable:

Correct AnswerverifiedShow Answer

The attribute of negotiability means that commercial paper can be readily transferred and accepted as a substitute for money.

Correct AnswerverifiedShow Answer

Carlos borrowed $100 from his friend,Juanita.Carlos signed a handwritten note stating,"I promise to pay $100 to the order of Juanita." Under these circumstances,the note is _____.

Correct AnswerverifiedShow Answer

A check is a draft payable on demand and drawn on a bank.

Correct AnswerverifiedShow Answer

Identify the statement that holds true of revised Article 3 of the Uniform Commercial Code regarding checks.

Correct AnswerverifiedShow Answer

If an instrument is undated,its "date" is the date it is issued by the maker or drawer.

Correct AnswerverifiedTrue

Which of the following statements is true of signing a negotiable instrument?

Correct AnswerverifiedShow Answer

A two-party instrument in which one person makes an unconditional promise in writing to pay another person,with or without interest,either on demand or at a specified,future time is a _____.

Correct AnswerverifiedShow Answer

A draft is a:

Correct AnswerverifiedShow Answer

Nigel,a resident of North Carolina,sent Claude,a resident of Lyon,France,a note that read,"Ninety days after date,I promise to pay to the order of Claude €5,000 (signed) Nigel." The note is:

Correct AnswerverifiedShow Answer

Which of the following is true of the negotiability of a written instrument?

Correct AnswerverifiedShow Answer

Ricardo borrowed $5,000 from his friend,Lorenzo.Ricardo signed a handwritten note stating,"I promise to pay $5,000 to Lorenzo on or before August 1,2001,in return for the same amount borrowed from him on May 1,2001." Under these circumstances,the note is _____.

Correct AnswerverifiedShow Answer

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