Question 1

An incomplete instrument is non-negotiable.

Accepted Answer

An incomplete instrument is one that is missing essential terms such as the amount of payment or the payee's name. Such an instrument cannot be negotiated and is therefore non-negotiable.

Question 2

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

Accepted Answer

An instrument that is payable at a fixed time but subject to acceleration by the holder can still be considered negotiable, as long as it meets the other requirements for negotiability under the Uniform Commercial Code (UCC). Acceleration clauses do not affect an instrument's negotiability.

Question 3

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.

Accepted Answer

The drawee is the bank on whose account the check is drawn. In this case, it is Mountain Bank, as Blaire wrote a check from her account at that bank to Friendly Grocery.

Question 4

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.

Accepted Answer

Under Revised Article 3, a note can still be negotiable even if the sum to be paid is uncertain, as long as the note contains an unconditional promise to pay a fixed amount of money, with or without interest or other charges described in the promise, and the interest can be determined by a reference to an external factor.

Question 5

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.

Accepted Answer

In a check transaction, the person who writes the check is known as the drawer. Therefore, in this scenario, Lake is the drawer since he is writing the check to pay his tuition to Emerson University. The university is the payee and Southern Bank is the drawee, which means the bank is responsible for paying out the funds to the payee.

Question 6

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

Accepted Answer

A reference to another writing in a promise or order does not make it conditional unless the reference specifically states conditions to the promise or order.

Question 7

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.

Accepted Answer

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

Question 8

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.

Accepted Answer

The requirement that the instrument must be written on paper is not actually necessary for negotiability. While many negotiable instruments are indeed paper documents, electronic documents can also qualify as negotiable instruments under certain circumstances. Thus, option C is the correct choice as it is the requirement that is not essential for negotiability.

Question 9

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.

Accepted Answer

The statement is incorrect. An instrument paying a fixed amount in British pounds is negotiable, but it may be subject to foreign exchange risks and may need to be converted to U.S. currency for payment.

Question 10

Which of the following is not a negotiable instrument?
A) A check
B) A draft
C) A certificate of deposit
D) A stock certificate

Accepted Answer

A stock certificate is not a negotiable instrument. It represents ownership in a company and cannot be transferred in the same manner as negotiable instruments like checks, drafts or certificates of deposit.

Question 11

Postdating an instrument will destroy its negotiability.

Accepted Answer

Postdating an instrument does not destroy its negotiability. Negotiability is determined by the instrument meeting certain requirements under the Uniform Commercial Code (UCC), such as being an unconditional promise or order to pay a fixed amount of money, and postdating relates to the timing of payment rather than these requirements.

Question 12

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.

Accepted Answer

The answer of An instrument which is ambiguous as to...

Question 13

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

Accepted Answer

This statement is true. The maker of a promissory note is the person who promises to pay the stated amount to the holder or bearer of the note.

Question 14

Bearer paper can be negotiable.

Accepted Answer

Bearer paper is a type of negotiable instrument that can be transferred by delivery alone, and does not require any endorsement or identification of a particular payee. Therefore, it can be negotiated or transferred to another person who becomes the new holder of the instrument.

Question 15

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

Accepted Answer

An I.O.U. is simply an acknowledgment of debt, whereas negotiable instruments, such as checks or promissory notes, are written promises to pay a specific amount of money and can be transferred or assigned to another person.

Question 16

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

Accepted Answer

The answer of Which of the following is not a...

Question 17

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

Accepted Answer

According to the Code, a signature can be any symbol or mark that is used to identify a person and indicate their intent to be bound by a record. This can include an X or a thumbprint, as long as it is intended to serve as the person's signature.

Question 18

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.

Accepted Answer

April is protected by the principle of breach of warranty and has the right to a common law claim. However, since the account was assigned, April must be notified of the assignment in order for Indra to collect payment. If Indra had not notified April of the assignment, April would only need to pay Lin the reduced amount of $16,000.

Question 19

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.

Accepted Answer

With a certificate of deposit, the maker is always a bank, whereas a promissory note can be made by any borrower.

Question 20

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

Accepted Answer

The drawee is the person or entity who is expected to pay the check, not the one who signs it. The person who signs the check is the drawer.

Quiz 26: Form and Content

An incomplete instrument is non-negotiable.

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

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

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.

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

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

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.

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

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.

Which of the following is not a negotiable instrument?