Question 1

Jacob bought a widget from Erin for $15 000. In payment, he gave her a cheque that was payable to her. The cheque was drawn on his account at the Bank of Kitchener. Erin signed her name on the back of the cheque and delivered it to Arthur in order to discharge a debt that she owed to him. Arthur presented the instrument to the Bank of Kitchener for payment, but was refused payment because the balance for Jacob's account was only $8000. Which of the following statements is TRUE?

Accepted Answer

Arthur may be able to sue Jacob, the drawer of the cheque, for the remaining balance since Jacob is responsible for ensuring sufficient funds are available. Erin, having endorsed the cheque to Arthur, is not liable for Jacob's insufficient funds.

Question 2

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

Accepted Answer

If the alteration is not apparent to the naked eye and Tara did not facilitate the alteration, Mike, as a holder in due course, is entitled to the original amount of $5000.

Question 3

Which of the following statements is TRUE with respect to certification of cheques?

Accepted Answer

Certification guarantees that the bank will honor the cheque, even if the account is overdrawn, as the bank sets aside funds to cover it.

Question 4

Stephania drafted a cheque that named Wilbur as the payee and the Bank of Alberta as the drawee. The cheque was certified. That must mean that

Accepted Answer

Certification of a cheque by the drawee bank indicates that the bank confirms there are sufficient funds in the drawer's account to cover the cheque amount.

Question 5

Raj owed $5000 to Monica. In payment of that debt, he gave her a cheque for that amount that was drawn on his account at the Bank of Regina. In fact, his account only held $3000 worth of credits. Which of the following statements is TRUE?

Accepted Answer

The answer of Raj owed $5000 to Monica. In payment...

Question 6

Which of the following defences may be either defect in title defences or real defences, depending upon the circumstances?

Accepted Answer

The answer of Which of the following defences may be...

Question 7

On February 1, Patricia bought a guitar from Metheny's Music Shop. The price was $2500. She gave the store a cheque for that amount that was dated June 1. Which of the following statements is TRUE?

Accepted Answer

A postdated cheque is one that is dated for a future date, and it cannot be cashed or deposited until that date. In this case, the cheque is dated June 1, so it cannot be honoured before that date.

Question 8

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

June 1 is not necessarily the due date because the due date is determined by the terms of the bill of exchange, which are not specified in the question.

Question 9

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

The answer of Martina bought a necklace from Roland. The...

Question 10

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

Ethan can enforce the cheque against Shoshanna if he is a holder in due course, as this status protects him from certain defenses, including the theft of the cheque.

Question 11

Wallace bought a widget from Sabrina. The price was $7500. When he collected the widget from her warehouse, he gave her a cheque that was drawn on his account at the Bank of Windsor. When he got the widget home, however, he discovered that it was defective. He therefore went to his bank and placed a stop order payment on the cheque. Which of the following statements is TRUE?

Accepted Answer

Wallace's stop payment order revoked the bank's authority to debit his account for the cheque, meaning the bank should not honour the cheque if presented.

Question 12

Which of the following defences may be used against a holder of a bill of exchange?

Accepted Answer

The answer of Which of the following defences may be...

Question 13

Alice bought a boat from Brian. The purchase price was $250 000. On February 1, she paid that price by giving him a bill of exchange drawn on her account at the Bank of Kenora. The bill was due on December 31 and it was payable to Brian. On March 1, Brian negotiated the bill to Carla. On April 1, the Bank of Kenora accepted the bill at Carla's request. On May 1, Carla placed a blank endorsement on the bill and negotiated it to Dave. On June 1, Dave negotiated the bill to Edna. Every attempt at negotiation was successful. Which of the following statements is TRUE?

Accepted Answer

Carla, as a holder in due course, could potentially recover $250,000 from Brian if the bill is dishonored and Brian had endorsed the bill.

Question 14

Which of the following types of endorsements can you place upon a negotiable instrument without creating any risk of liability for yourself?

Accepted Answer

The answer of Which of the following types of endorsements...

Question 15

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 blank endorsement on the back of a cheque makes it a bearer instrument, meaning it can be cashed or deposited by anyone who holds it.

Question 16

Which of the following are most likely to be classified as types of negotiable instrument?

Accepted Answer

The answer of Which of the following are most likely...

Question 17

On May 1, Emile bought a widget from Megan. The price was $15 000. On June 1, Emile paid that price by giving Megan a bill of exchange that was drawn on the Bank of Swift Current. The bill was stated to be payable "on demand." Which of the following statements is TRUE?

Accepted Answer

A bill of exchange payable "on demand" means that the holder can present it for payment at any time and is entitled to receive the amount immediately upon presentation.

Question 18

Which of the following statements is TRUE with respect to bills of exchange?

Accepted Answer

A bill of exchange can be drawn on any party, not just a bank, unlike a cheque which must be drawn on a bank.

Question 19

Which of the following statements is TRUE with respect to promissory notes?

Accepted Answer

A promissory note is a financial instrument that typically involves a promise to pay a specified amount of money, which may or may not include interest. It does not require the performance of services, must involve consideration, and typically involves two parties: the maker and the payee. It does not have to be payable in installments.

Question 20

Claire gave a cheque for $5000 to Antonio. Which of the following statements is TRUE?

Accepted Answer

A cheque is a special type of bill of exchange that is drawn upon a bank.

Quiz 14: Special Contracts: Negotiable Instruments