Law 1 Quizzes
MULTIPLE CHOICE QUESTIONS
Fact Pattern 24-1A (Questions A1–A2 apply)
Flik draws a check payable to “GrocMart” to buy groceries.
1. Refer to Fact Pattern 24-1A. Flik’s check is most likely
a. a certificate of deposit.
b. a negotiable instrument.
c. a promise to pay.
d. a promissory note.
2. Refer to Fact Pattern 24-1A. With respect to Flik’s check, GrocMart is
a. the drawee.
b. the drawer.
c. the maker.
d. the payee.
Fact Pattern 24-2A (Questions A3–A4 apply)
Quantity Sales Corporation and Resources Purchasing Company enter a contract for a sale of processed silver. Quantity Sales draws a draft unconditionally ordering Resources Purchasing to pay $50,000 to Quantity Sales’s order in sixty days. Resources Purchasing signs and dates the draft.
3. Refer to Fact Pattern 24-2A. This instrument is
a. a banker’s acceptance.
b. a nonnegotiable instrument.
c. a promissory note.
d. a trade acceptance.
4. Refer to Fact Pattern 24-2A. On this instrument, Quantity Sales is
a. the banker.
b. the drawer.
c. the maker.
d. the trader.
5. To obtain office supplies for Doctors Medical Clinic, Elmo executes a draft in favor of Flynn. A draft is
a. a conditional promise to pay money.
b. an unconditional written order to pay money.
c. a qualified promise to set aside a sum of money.
d. a restricted promise to deliver goods at a future date.
6. Diners Restaurant issues an instrument in favor of Eatery Supplies, Inc. For the instrument to be negotiable, it need not
a. be an unconditional promise or order to pay.
b. be payable on demand or at a specific time.
c. be signed by Diner’s Restaurant.
d. recite the consideration given in exchange for a promise to pay.
7. Rita owes $6,000 in unpaid taxes. In the sand of Seaside Beach, she executes an instrument for that amount that otherwise meets the requirements
for negotiability. This instrument is likely
b. nonnegotiable, because an instrument must be on paper.
c. nonnegotiable, because sand is not sufficiently permanent.
d. nonnegotiable, because the government does not appreciate it.
8. To finance the purchase of a car from Giant Auto Sales, Hoppy signs an instrument promising to pay to “Ideal Credit Union” $18,000 with
interest in installments with the final payment due May 15, 2014. To be negotiable, this instrument must include on its face
a. any conditions on the sale of the car.
b. any conditions to the disbursement of the funds.
c. any conditions to the repayment of the loan.
d. no conditions.
9. To finance the purchase of a house from Tuna, Uri signs an instrument promising to pay to “Verity Mortgage Service” $160,000 with interest in
installments with the final payment due July 10, 2040. To be negotiable, this instrument must include the signature of
a. a non-party witness.
b. Tuna or Tuna’s realtor.
d. Verity’s chief financial officer.
10. Ross signs an instrument using an “R” with a circle around it. With this mark for a signature, the instrument is
b. nonnegotiable, because an initial does not state the signer’s name.
c. nonnegotiable, because an initial is not a signature.
d. nonnegotiable, because a simple initial implies a lack of binding intent.
11. Karen writes on a piece of paper, “I owe you $600,” signs it, and gives it to Lou. This instrument is
b. nonnegotiable, because it does not include an express promise to pay.
c. nonnegotiable, because it does not recite any consideration.
d. nonnegotiable, because it does not state any conditions to payment.
12. Jack signs an instrument that states it is being executed “in accord with a contract for the sale of three magic beans dated June 1.” This instrument
b. nonnegotiable, because banks cannot easily process commodities.
c. nonnegotiable, because it includes the specific date of a contract.
d. nonnegotiable, because it refers to an express contract.
13. Kelly signs an instrument in favor of Leo that states it is “subject to a certain agreement between Kelly and Mona.” This instrument is
b. nonnegotiable, because it is made subject to a separate agreement.
c. nonnegotiable, because it refers to a separate agreement.
d. nonnegotiable, because Kelly and Mona are not the same persons.
14. Ray signs a promissory note for $10,000 in favor of State University (SU). The note does not specify the date of its payment. Ray defaults. In SU’s suit to collect on the note, the court will most likely rule in favor of
a. Ray, because SU assumed the risk that the note would not be paid.
b. Ray, because the note is not payable at a definite time or on demand.
c. SU, because the note is an unconditional promise to pay the holder.
d. SU, because there is a uniform “default time” for repayment when a date is not specified.
15. On behalf of Digital Cable Company, Ed signs an instrument in which he promises to deliver 1,000 feet of optic fiber cable to First Internet
Bank on March 1. This instrument is
b. nonnegotiable, because cable is not a medium of exchange authorized
or adopted by a government as currency.
c. nonnegotiable, because it does not indicate a specific type of cable.
d. nonnegotiable, because it does not recite any consideration.
16. Pam signs an instrument payable to the order of Quick Credit, Inc., that allows a holder to demand payment of the entire amount due, with interest,
if Pam fails to make a payment. This instrument is
b. nonnegotiable, because a holder can move up the payment date.
c. nonnegotiable, because moving up the payment date is conditional.
d. nonnegotiable, because the exact payment date cannot be determined from the face of the instrument.
17. Quincy draws a check payable to “Replay Stadium” to buy two season tickets to the next year’s State College football games. This instrument is
a. a bearer instrument.
b. an order instrument.
c. valid but nonnegotiable.
18. Sid signs a promissory note payable to Tony on which Sid conspicuously notes that it is “not negotiable” and gives the note to Toney. This instrument
b. nonnegotiable, because it includes the notation “not negotiable.”
c. nonnegotiable, because it is a promissory note.
d. nonnegotiable, because it was given to Bob.
19. Bill signs a check payable to the order of City Bank, filling in the blanks for the amount with the figures “$100” and “One thousand and 00/100
dollars.” This check is payable in the amount of
20. On May 1, Doug signs a check that is payable to the order of Excel Credit Corporation and that is dated July 1. This check is
b. nonnegotiable, because it is payable to Excel Credit Card
c. nonnegotiable, because it is postdated.
d. nonnegotiable, because it is signed by Doug.