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Function and Creation of Negotiable Instruments

Page history last edited by abogado 7 years, 2 months ago

Quizzes-Fall2013

 

 

Chapter 24 The Function and Creation of Negotiable Instruments

 

MULTIPLE CHOICE QUESTIONS

Fact Pattern 24-1B (Questions B1–B2 apply)

Dominion Sales Ltd. in Canada and Eagle Buying Company in the United

States enter a contract for a sale of forestry products. Dominion draws a draft

unconditionally ordering Great Federal Bank, Eagle’s bank, to pay $60,000 to

Dominion’s order in sixty days. Eagle signs and dates the draft.

 

B1. Refer to Fact Pattern 24-1B. This instrument is

a. a banker’s acceptance.

b. a nonnegotiable instrument.

c. a promissory note.

d. a trade acceptance.

 

 

B2. Refer to Fact Pattern 24-1B. With respect to this instrument, Dominion

is

a. the banker.

b. the maker.

c. the payee.

d. the trader.

 

 

B3. Beck draws a check payable to “County Farm Supply” to buy a quantity

of fertilizer to deposit in Beck’s field. This check is

a. a certificate of deposit.

b. a draft.

c. a promise to pay.

d. a promissory note.

 

Fact Pattern 24-2B (Questions B4–B5 apply)

Ewa signs an instrument unconditionally promising to pay to “First State

Bank” $5,000 with interest in installments with the final payment due June 1,

2012.

 

B4. Refer to Fact Pattern 24-2B. The instrument that Ewa signed is most

likely

a. a certificate of deposit.

b. a draft.

c. an order to pay.

d. a promissory note.

 

 

B5. Refer to Fact Pattern 24-2B. With respect to this instrument, First

States Bank is

a. the drawee.

b. the drawer.

c. the maker.

d. the payee.

 

 

B6. Gail owes $5,000 in unpaid taxes. Using the back of an old t-shirt, she

executes an instrument for $5,000 that otherwise meets the require-

ments for negotiability. This instrument is most likely

a. negotiable.

b. nonnegotiable, because an instrument must be on paper.

c. nonnegotiable, because a t-shirt is not sufficiently permanent.

d. nonnegotiable, because the government does not appreciate it.

 

 

B7. Dino, the chief executive officer of Electrician Services, Inc., signs an in-

strument by placing his thumbprint on it. This instrument is

a. negotiable.

b. nonnegotiable, because a thumbprint does not state the signer’s

name.

c. nonnegotiable, because a thumbprint implies a lack of binding

intent.

d. nonnegotiable, because a thumbprint is not a signature.

 

 

B8. To borrow money to finance the start-up of his business, Buck executes

an instrument in favor of City Bank. For the instrument to be negotiable,

the signature must be

a. anywhere on the instrument.

b. anywhere on the lower half of the instrument only.

c. in the lower left-hand corner of the instrument only.

d. in the lower right-hand corner of the instrument only.

 

 

B9. USA Oil Corporation signs an instrument that states it is being exe-

cuted “in accord with a contract for the purchase of 4,000 barrels of oil

dated May 1.” This instrument is

a. negotiable.

b. nonnegotiable, because information about the sale must be ob-

tained from another source.

c. nonnegotiable, because it states an express condition to payment.

d. nonnegotiable, because the terms of the sale are not clear.

 

 

B10. Kevin, the owner of Livestock Ranch Corporation, signs an instrument

that includes the phrase “payment for this note will be made from the

proceeds of next year’s stock sale.” This instrument is

a. negotiable.

b. nonnegotiable, because information about the sale must be ob-

tained from another source.

c. nonnegotiable, because it states an express condition to payment.

d. nonnegotiable, because the reasons for the note are not clear.

 

 

B11. International Properties, Inc. (IPI), signs an instrument in favor of

Financial Investments Corporation that includes the statement “IPI

plans to pay this debt from the proceeds of the sale of the IPI Office

Building in Montreal.” This instrument is

a. negotiable.

b. nonnegotiable, because banks cannot easily process office

buildings.

c. nonnegotiable, because it refers to a separate sale.

d. nonnegotiable, because Montreal is in Canada, not the United

States.

 

 

B12. On behalf of First-Rate Capital, Inc., Greg signs an instrument promis-

ing to pay $5,000 in gold to Hot Funds, Inc., on May 15. This instrument

is

a. negotiable.

b. nonnegotiable, because gold is not a medium of exchange author-

ized or adopted by a government as currency.

c. nonnegotiable, because it does not recite any consideration.

d. nonnegotiable, because it is for an amount of $500 or more.

 

 

B13. Opal signs a promissory note payable to the order of Payday Loan

Company. The note states that it is payable “with interest at the legal

rate.” This note is

a. negotiable.

b. nonnegotiable, because it does not specify a rate of interest.

c. nonnegotiable, because it is a promissory note.

d. nonnegotiable, because it is payable only with interest.

 

 

B14. Maria signs an instrument payable to the order of National Loans, Inc.,

“on or before” June 15. This instrument is

a. negotiable.

b. nonnegotiable, because the maker can move up the payment date.

c. nonnegotiable, because moving up the payment date is optional.

d. nonnegotiable, because the exact payment date cannot be deter-

mined from the face of the instrument.

 

 

B15. Tyrone draws a check payable to “Cash” and presents it to United Bank

for payment. This instrument is

a. a bearer instrument.

b. an order instrument.

c. valid but nonnegotiable.

d. void.

 

 

B16. Wilbur signs a note that includes a clause under which the note’s holder

can delay the date of its payment indefinitely. This is

a. an acceleration clause.

b. an extension clause.

c. an immaturity clause.

d. a stop-payment clause.

 

 

B17. EZ Credit Company signs an instrument payable to the order of Flem

that states, “The maker of this note at the date of maturity, May 1, 2011,

can extend the time of payment, but for no more than a reasonable time.”

This instrument is

a. negotiable.

b. nonnegotiable, because it includes an extension clause.

c. nonnegotiable, because it is not payable within a definite time.

d. nonnegotiable, because it is payable to a specific payee.

 

 

B18. Will signs a check payable to “X” and gives it to Yves. This check is

a. negotiable.

b. nonnegotiable, because it does not indicate a specific payee.

c. nonnegotiable, because obviously it was executed as a joke.

d. nonnegotiable, because “Yves” is not “X.”

 

 

B19. Lucy signs a $1,000 note payable, at 6 percent interest, on May 1 to

Metro Bank and writes on its face that it is “nonnegotiable.” This note is

a. negotiable.

b. nonnegotiable, because it does not include an acceleration clause.

c. nonnegotiable, because it is payable with interest.

d. nonnegotiable, because its maker conspicuously wrote this on its

face.

 

 

B20. Julie signs a check payable to the order of Kwik Mart Stores, Inc., that

does not include a date. This check is

a. negotiable.

b. nonnegotiable, because it does not include a date.

c. nonnegotiable, because it is payable to Kwik-Mart.

d. nonnegotiable, because it is signed by Julie.

 

 

 

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