Question 1

The court in Cooperative Centrale Raiffeisen-Boerenleenbank B.A.v.Bailey found:
A) whether an instrument is negotiable is a question of fact.
B) whether an instrument is negotiable is to be determined without reference to the intent of the parties.
C) the question of whether the promissory note was negotiable had to be determined by questioning the parties to the transaction as to their intent.
D) the wording of the note was unclear and therefore it did not fall within the UCC Article 3 requirements of negotiability.

Accepted Answer

The court determined that the negotiability of an instrument is a matter of law to be decided by the court based on the face of the document itself, without reference to the intent of the parties involved. This approach aligns with the principles outlined in the Uniform Commercial Code (UCC) Article 3, which sets forth the requirements for negotiability.

Question 2

In the development of the law of negotiable instruments, which of the following was not a step?
A) Centuries ago, contract rights to the payment of money were not assignable because the contractual promise ran to the promisee.
B) Contractual rights became assignable to third parties.
C) The law of assignments changed to permit assignees to obtain greater rights than their assignors.
D) The concept of a holder in due course developed, which allowed certain good faith transferees who gave value to acquire the right to be paid, free of most of the defenses to which an assignee would be subject.

Accepted Answer

All of the other steps listed are accurate. The development of the law of negotiable instruments began with the fact that contract rights to payment were not assignable. However, as commercial practices developed, it became necessary to have a way for businesses to transfer these payment obligations to third parties. Over time, the law of assignments evolved to permit assignees to obtain greater rights than their assignors. Finally, the concept of a holder in due course developed to protect good faith transferees who acquired negotiable instruments, such as checks or promissory notes, and gave value for them. These holders in due course were granted certain rights and could be paid even if the original debtor had defenses against the transferor.

Question 3

A promise or order is payable at a definite time if it is payable:
A) at a definite period of time after sight or acceptance.
B) at a time readily ascertainable at the time the promise or order is issued.
C) at a fixed date or dates.
D) All of these.

Accepted Answer

All of these conditions (A, B, C) define circumstances under which a promise or order is considered payable at a definite time, according to the Uniform Commercial Code (UCC) regarding negotiable instruments.

Question 4

Would an instrument containing the following language be negotiable? "Harold T.Stone, as President, hereby promises to pay $12,348 to the order of Joe Jones Furniture for office equipment for Redtyn Corporation, payable from its corporate assets.(Signed) Harold T.Stone as President, Redtyn Corporation."
A) Yes, because it meets all the requirements of negotiability.
B) No, because the promise refers to another contract.
C) Yes, because Redtyn is a business entity.
D) No, because its payment is limited to a particular fund.

Accepted Answer

The answer of Would an instrument containing the following language...

Question 5

Which of the following would be an unconditional promise or order to pay?
A) "I hereby acknowledge my debt to John Jones."
B) "IOU fifty dollars."
C) "I hereby promise to pay $2,000 to John Jones provided the lawn tractor sold meets the contractual specifications."
D) "Pay to the order of bearer ten dollars."

Accepted Answer

Option D, "Pay to the order of bearer ten dollars," is an unconditional promise or order to pay because it does not contain any conditions that must be met before payment is made.

Question 6

The UCC states that an instrument fulfills the requirements of being payable to bearer if it:
A) states it is payable to "cash" or to the order of "cash."
B) states it is payable to bearer or the order of bearer.
C) does not state a payee.
D) All of these.

Accepted Answer

Under the Uniform Commercial Code (UCC), an instrument is considered payable to bearer if it meets any of the conditions listed in options A, B, and C. This includes being explicitly payable to "cash" or "bearer," or not specifying a payee at all.

Question 7

X signs a negotiable instrument ordering Y to pay Z the sum of $500.Y is the:
A) drawer.
B) payee.
C) maker.
D) drawee.

Accepted Answer

In a negotiable instrument where X orders Y to pay Z a sum of money, Y is the drawee, the party directed to pay the money.

Question 8

A promise or order is unconditional unless it states that:
A) there is an express condition to payment.
B) rights or obligations concerning the order or promise are stated in another writing.
C) the promise or order is subject to or governed by another writing.
D) All of these.

Accepted Answer

All of these conditions (express condition to payment, rights or obligations stated in another writing, and being subject to or governed by another writing) make a promise or order conditional.

Question 9

Which of the following will destroy negotiability?
A) Making the instrument subject to the terms of another agreement.
B) Signing a check with an "X."
C) Making the instrument payable in Japanese yen.
D) Signing a check in pencil.

Accepted Answer

Making an instrument subject to the terms of another agreement destroys its negotiability because it introduces uncertainty about the terms and conditions under which the instrument is to be paid, violating the requirement for negotiability that the terms of payment be clear and not subject to external conditions.

Question 10

Elmore purchases goods from Grady, and Elmore executes and delivers a negotiable note to Grady for $1,200, payable to Grady's order in 30 days.Two weeks later, Grady negotiates the note to McDaniel.Which of the following is true?
A) McDaniel can acquire no greater rights than Grady had in the note.
B) If the goods are defective, Elmore's defense will necessarily be available against McDaniel.
C) McDaniel is required to notify Elmore that he acquired the note.
D) Whether Elmore's defense is available against McDaniel will depend on whether McDaniel acquired the note in good faith and for value, had no knowledge of the defense, and took the note without reason to question its authenticity.

Accepted Answer

McDaniel's rights as a holder in due course (which requires good faith, for value, without knowledge of defenses, and without reason to question authenticity) determine whether Elmore's defenses against Grady can be asserted against McDaniel. If McDaniel meets these criteria, Elmore's personal defenses related to the transaction with Grady (such as the goods being defective) may not be effective against McDaniel.

Question 11

Bill's car broke down on a dark, rainy night.Along came Andy in his service station's four-wheel drive truck with tools and supplies in the back.Bill didn't have any credit cards and only $3.25 cash, so Andy told him to write a check or an IOU.Neither Andy nor Bill had any paper, so Bill wrote on the cover of Andy's lunchbox: "If my car is fixed right by Andy Walcott, I will pay him $150.(Signed) Bill Boyd." Andy indorses the note and takes it to a commercial factor for negotiation.The factor refuses, saying it is non-negotiable because it:
A) is written on a lunchbox.
B) mentions the existence of a contract to repair the car.
C) is conditional on satisfactory repair of the car.
D) All of these.
E) None of these.

Accepted Answer

The factor refuses because the note is conditional on the satisfactory repair of the car, making it non-negotiable. Negotiable instruments must contain an unconditional promise or order to pay.

Question 12

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 bearer."
D) A check payable to "cash" or a   check that says "pay to the order of bearer."

Accepted Answer

The answer of Which of the following would be a...

Question 13

Which article of the UCC governs "negotiable instruments"?
A) Article 6.
B) Article 9.
C) Article 2.
D) Article 3.

Accepted Answer

Article 3 of the Uniform Commercial Code (UCC) governs negotiable instruments, which include checks, drafts, notes, and other similar forms of promises to pay.

Question 14

A definite time required for negotiability would NOT be satisfied in which instance?
A) Payable on or before January 2, 2019.
B) Payable one year from the completion of the building
C) Payable one week after demand is made.
D) Payable on June 15, 2019 or, if the building is not complete on that date, one year from that date.

Accepted Answer

For a financial instrument to be negotiable, it must have a fixed date or be payable upon demand. Option B, "Payable one year from the completion of the building," does not satisfy the requirement for a definite time because the completion date of the building is uncertain.

Question 15

An instrument is payable to order if it is payable:
A) to the order of an identified person.
B) to an identified person or order.
C) Both of these.
D) Neither of these.

Accepted Answer

An instrument is payable to order if it is expressed to be so payable to an identified person or to the order of an identified person. Both A and B describe conditions where an instrument is considered payable to order, thus making C the correct answer.

Question 16

Negotiable instruments:
A) have increased in usage to the point where they are now approximately equal to usage of cash for payments.
B) are used primarily for smaller transactions.
C) include drafts, promissory notes, assignments, and certificates of deposit.
D) in the form of checks have decreased in use since 2000.

Accepted Answer

The use of checks, a type of negotiable instrument, has decreased since 2000 due to the rise of electronic payments and digital banking.

Question 17

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, the terminology is ambiguous and therefore the draft must be paid only to the order of Joe Jones.
B) No, unless Joe Jones's name is crossed off.
C) Yes, since the word "or" is contained in the instrument, either Joe Jones or the bearer of the draft may obtain payment.
D) No, unless "bearer" is handwritten.

Accepted Answer

The draft is payable to either Joe Jones or the bearer, as indicated by the use of "or" in the phrase "to the order of Joe Jones or to bearer." This means that whoever possesses the draft (in this case, Sally, who found it) can demand payment.

Question 18

References to other agreements in negotiable instruments:
A) destroy negotiability unless the recital makes the instrument subject to, or governed by, the terms of another agreement.
B) do not destroy negotiability in any circumstances.
C) do not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement.
D) None of these.

Accepted Answer

References to other agreements in negotiable instruments do not destroy their negotiability unless the instrument explicitly states that its terms are subject to or governed by another agreement. This maintains the instrument's independence and ease of transfer, which are key characteristics of negotiability.

Question 19

Which of the following has been held to destroy the negotiability of an instrument and to render its transfer a contractual assignment?
A) "Pay to the order of John Jones."
B) "I wish you would pay."
C) "Pay bearer."
D) None of these.

Accepted Answer

"I wish you would pay" is a request, not an order, and therefore does not create a negotiable instrument.

Question 20

Which of the following notes would not be negotiable? A written, signed promise to pay:
A) $50,000 to the order of Crouch, and the maker of the note orally stated to Crouch that the money would only be paid if all contractual specifications were met.
B) $500 and a rick of firewood on or before September 10.
C) which includes a statement that, "This note is given in partial payment for a piano to be delivered in one week from date in accordance with a contract of this date between the maker and the payee."
D) All of these.

Accepted Answer

Option B is not negotiable because it involves the payment of money and an additional performance (a rick of firewood), which does not comply with the requirement for negotiability that the promise must be to pay money only.

Quiz 24: Form and Content

The court in Cooperative Centrale Raiffeisen-Boerenleenbank B.A.v.Bailey found:

In the development of the law of negotiable instruments, which of the following was not a step?

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

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

The UCC states that an instrument fulfills the requirements of being payable to bearer if it:

X signs a negotiable instrument ordering Y to pay Z the sum of $500.Y is the:

A promise or order is unconditional unless it states that:

Which of the following will destroy negotiability?

Elmore purchases goods from Grady, and Elmore executes and delivers a negotiable note to Grady for $1,200, payable to Grady's order in 30 days.Two weeks later, Grady negotiates the note to McDaniel.Which of the following is true?

Which of the following would be a bearer instrument?

Which article of the UCC governs "negotiable instruments"?

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

An instrument is payable to order if it is payable:

Negotiable instruments:

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

References to other agreements in negotiable instruments:

Which of the following has been held to destroy the negotiability of an instrument and to render its transfer a contractual assignment?

Which of the following notes would not be negotiable? A written, signed promise to pay: