Deck 26: Form and Content

Question 1

A substitute check created under Check 21 is the legal equivalent of the original check and contains all the information contained on the original check.

Answer 1

True

Question 2

Negotiability is wholly a matter of form.

Answer 2

True

Question 3

A draft involves only two parties: a drawer and a payee.

Answer 3

False

Question 4

Time paper is payable at a definite time.

Question 5

A written and signed promise by Miller to Baker to deliver 1,000 pounds of flour in 30 days is an example of a negotiable instrument.

Question 6

Notes and certificates of deposit are orders to pay money to a third person.

Question 7

A cashier's check is drawn by a bank upon itself to the order of a named payee.

Question 8

Where both words and numerals are used to describe the amount payable,the numerals will be used to resolve any differences.

Question 9

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

Question 10

Negotiability gives commercial paper a high degree of marketability and commercial utility by allowing it to be freely transferable and enforceable by a holder in due course.

Question 11

Handwritten words supersede contradicting typewritten words in negotiable instruments.

Question 12

To be negotiable,an instrument must be in writing.

Question 13

Under the law of assignments,the assignee stands in the shoes of the assignor.

Question 14

A check is a draft payable on demand.

Question 15

A maker must sign in the lower,right-hand corner of a check,on the printed line.

Question 16

A form of time draft known as a trade acceptance is used as a credit device in commercial transactions.

Question 17

Only a bank may serve as the maker of a certificate of a deposit.

Question 18

A time draft is one payable upon demand (at the time it is presented to the drawee).

Question 19

Under Revised Article 3,a promise to pay only out of a particular fund will destroy the negotiability of an instrument.

Question 20

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

Question 21

An incomplete instrument is non-negotiable.

Question 22

An instrument payable at a fixed time subject to acceleration by the holder is not negotiable.

Question 23

Blaire buys some items at Friendly Grocery and writes a check to the store on her account at Mountain Bank.Who is the drawee?

A) Blaire
B) Friendly Grocery
C) Mountain Bank
D) There is none.

Question 24

Javon signed a 90-day note promising to pay $1,000 plus interest.The note states interest is to be based on a variable published rate external to the note.The sum the borrower must repay is uncertain;therefore,under Revised Article 3,the note is not negotiable.

Question 25

If Lake writes a check drawn on his account at Southern Bank to Emerson University to pay his tuition:

A) Lake is the drawer.
B) the university is the drawee.
C) the bank is the payee.
D) Lake is the maker.

Question 26

A reference to another writing makes a promise or order conditional.

Question 27

Under Revised Article 3,a check which meets all the requirements of being a negotiable instrument except that it is not payable to bearer or order is nevertheless a negotiable instrument.

Question 28

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

A) It must contain a promise or order to pay.
B) It must be for a fixed amount.
C) It must be written on paper.
D) It must be signed.

Question 29

An instrument paying a fixed amount in British pounds is not negotiable because the instrument must be payable in money authorized or adopted by the U.S.as part of its currency.

Question 30

Which of the following is not a negotiable instrument?

A) A check
B) A draft
C) A certificate of deposit
D) A stock certificate

Question 31

Postdating an instrument will destroy its negotiability.

Question 32

An instrument which is ambiguous as to whether it is a draft or note,such as,"To Alma: On demand I promise to pay $200 to the order of Brittany.Signed,Christopher" must be treated as a note and be presented to Christopher for payment.

Question 33

The person who signs a note and promises to pay it is the maker.

Question 34

Bearer paper can be negotiable.

Question 35

An "I.O.U." is not considered a negotiable instrument.

Question 36

Which of the following is not a reason for the use of negotiable instruments?

A) Reduction of the chance of forgery or material alteration
B) Convenience
C) Elimination of the risk of loss or theft of cash
D) Reduction of cost to the federal government of maintaining an adequate supply of currency

Question 37

An "X" or a thumbprint could constitute a signature under the Code.

Question 38

April purchases $18,000 of goods from Lin on thirty days' credit,and Lin assigns the account to Indra.If April finds the goods defective and only worth $16,000:

A) she has no defense against full payment since the account was assigned.
B) she only needs to pay Indra $16,000 if Indra had notified her of the assignment.
C) Indra is entitled to the full $18,000 since she acquires rights greater than those of Lin,who assigned the contractual rights to payment.
D) she must pay $16,000 directly to Lin regardless of whether Indra notified her of the assignment.

Question 39

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

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) a writing is required.

Question 40

The drawee is the individual who signs a check and promises to pay.

Question 41

Which of the following is correct with respect to negotiability?

A) The writing requirement means that a check must be written on paper.
B) An order or promise to pay only out of a particular fund is permissible under Revised Article 3.
C) Money must be in U.S.dollars.
D) A negotiable instrument must be payable at a definite time.

Question 42

Which of the following will destroy negotiability?

A) Antedating a check
B) Making the right to payment subject to the terms of another agreement
C) Marking a check payable only out of the proceeds of a particular sale
D) Writing a check on notebook paper

Question 43

Which of the following would not be considered "money" within the meaning of the Code?

A) Diamonds
B) Mexican pesos
C) Swiss francs
D) Nigerian naira

Question 44

An instrument contains the following language: "Harold T.Stone as President hereby promises to pay $12,348 to the order of Joe Jones Furniture for office equipment for Redkenn Corporation,payable from its corporate assets.(Signed)Harold T.Stone as President,Redkenn Corporation." Would the instrument be negotiable?

A) No,because the promise refers to another contract
B) No,because its payment is limited to a particular fund
C) Yes,because it meets all the requirements of a negotiable instrument
D) Yes,because it is unequivocal

Question 45

Which of the following is not true?

A) To have the full benefit of negotiability,negotiable instruments not only must meet the requirements of negotiability but also must be acquired by a holder in due course.
B) A transferee of a negotiable instrument can acquire rights no greater than those of the transferor.
C) A holder in due course takes a negotiable instrument free of most of the defenses to which an assignee would be subject.
D) The number of checks written each year has decreased in recent years.

Question 46

The Check Clearing for the 21st Century Act:

A) creates a new negotiable instrument.
B) requires banks to accept checks in electronic form.
C) requires banks to create image replacement documents for any checks received.
D) allows customers to withdraw more cash from their accounts.

Question 47

Payment to a named payee by a bank with a check drawn on itself is a:

A) cashier's check.
B) trade acceptance.
C) sight draft.
D) time draft.

Question 48

A promise or order is payable at a definite time if it is payable:

A) on or before a stated date.
B) at a definite period of time after sight or acceptance.
C) at a time readily ascertainable at the time the promise or order is issued.
D) All of these.

Question 49

Words of negotiability are:

A) "To the order of."
B) "To bearer."
C) "Pay to."
D) All of these

Question 50

Amanda goes to American Bank where she uses $2,000 of her savings to purchase a six-month certificate of deposit.In this case:

A) Amanda is the maker.
B) American Bank is the maker.
C) American Bank is the payee.
D) Amanda is the promisor.

Question 51

Which of the following is correct with respect to the fixed amount requirement of negotiability under Revised Article 3?

A) The fixed amount requirement applies only to the principal.
B) Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates.
C) A sum certain may be payable in installments or with a fixed discount if paid before maturity.
D) All of these are correct.

Question 52

Joel's car broke down on a dark,rainy night.Along came Andy in his four-wheel drive truck with tools and supplies in the back.Joel didn't have any credit cards and had only $3.25 cash,so Andy told him to write a check or an IOU.Neither Andy nor Joel had any paper,so Joel wrote on the cover of Andy's lunchbox: "If my car is fixed right by Andy Walcott,I will pay him $150.(Signed)Joel Boyd." Andy indorses the note and takes it to a bank for negotiation.The bank refuses,saying it is non-negotiable because:

A) it is written on a lunchbox.
B) it mentions the existence of a contract to repair the car.
C) it is conditional on satisfactory repair of the car.
D) Andy does not have a photo ID.

Question 53

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

A) Payable on or before January 1,2015
B) Payable one week after demand is made
C) Payable one year from the completion of the building
D) A dated instrument payable "90 days after date"

Question 54

Which of the following would be a bearer instrument?

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 Quality Oil Company"
D) A municipal bond issued in 2010.

Question 55

Akeya sells and delivers goods to Wayne for $10,000.Wayne executes and delivers a negotiable note to Akeya for $10,000 payable to Akeya's order in sixty days.A week later,Akeya duly negotiates the note to Maria.Which of the following is correct?

A) Maria is required to notify Wayne that she has acquired the note from Akeya.
B) If the goods are defective,Wayne's defense against Akeya is not available against Maria if Maria acquired the note in good faith and for value and had no knowledge of Wayne's defense against Akeya and took the note without reason to question its authenticity.
C) Maria is not entitled to hold Wayne for the full face amount of the note at maturity if Wayne has a valid defense against Akeya for defective goods regardless of the circumstances surrounding the negotiation of the note to Maria.
D) If there is a valid defense against Akeya,Maria cannot become a holder in due course when the note is transferred to her.

Question 56

A medium of exchange adopted or authorized by a sovereign government as part of its currency is known in the law of negotiable instruments as:

A) the sum certain.
B) consideration.
C) value.
D) money.

Question 57

A draft is payable "to the order of Joe Jones or to bearer." Sally finds it and demands payment.Should the drawer pay Sally?

A) No,unless Joe Jones' name is crossed off
B) No,unless "bearer" is handwritten
C) Yes,an instrument made payable both to order and to bearer is payable to bearer
D) Yes,since the instrument is ambiguous,Joe Jones has no right to payment and only the bearer has the right to demand payment

Question 58

Which article of the UCC deals with "negotiable instruments"?

A) Article 1
B) Article 2
C) Article 3
D) Article 9

Question 59

Which of the following will destroy negotiability?

A) Leaving the name of the payee off a check
B) Making the check payable in British pounds
C) Signing a check with an "X"
D) Postdating the check

Question 60

The Code provides that which of the following provisions may be included in an instrument without adversely affecting negotiability?

A) A power to give collateral to secure payment
B) Authorization to confess judgment on the instrument
C) Waiver of the benefit of any law intended for the protection of the obligor
D) All of these

Question 61

Identify the parties to checks and notes.

Question 62

Distinguish between a note and a certificate of deposit.How are they alike? How are they different? Explain your answer.

Question 63

Michael is the maker of a note which states that it will be due on March 10,2015.The note contains a clause stating that "payment will be limited to the proceeds of the sale of the contents of freight car No.1234." Is the note negotiable? Why or why not? Explain.

Question 64

Which of the following is true of the "order to pay" requirement of a negotiable instrument?

A) It is an instruction to pay and must be more than an authorization or request.
B) It must identify with reasonable certainty the person to be paid.
C) The addition of words of courtesy,such as "please pay," will not destroy the negotiability.
D) All of these.

Question 65

The Code section which sets forth the requirements that must be met for an instrument to be negotiable is:

A) 2-209.
B) 3-104.
C) 4-405.
D) 3-250.

Question 66

What are the requirements of negotiability under the Code? List and briefly summarize them.

Question 67

All but which of the following is required of a negotiable instrument?

A) It must be payable only out of a particular fund.
B) It must contain an unconditional promise to pay a fixed amount in money.
C) It must be payable on demand or at a fixed future date.
D) It must be in writing and signed by the maker or drawer.

Question 68

Which of the following would be an unconditional promise or order to pay?

A) I hereby acknowledge my debt to John Jones.
B) I hereby assign all my rights under this instrument to John Jones.
C) Pay to the order of bearer ten dollars.
D) IOU fifty dollars.