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312541
312541
If you write a check to pay for your groceries, the check is:
a. a certified note.
b. a negotiable instrument.
c. a promise to pay.
d. a certificate of deposit.
Answers:
a. Incorrect. A check is a kind of draft and is not a certified note.
b. Correct. A check is the most commonly used form of a draft, and a
draft is a negotiable instrument.
c. Incorrect. A check is an order to pay, not a promise to pay.
d. Incorrect. A check is not a certificate of deposit.
2.
Answers:
a. Incorrect. The law of negotiable instruments is, largely, a product of
Western Europe and developed over the course of centuries.
b. Incorrect. The northern African law of property was not the genesis of
the law of negotiable instruments.
c. Correct. The law merchant, or lex mercatoria, was a sophisticated body
of private law (law not made by government) that was accepted and
adhered to by merchants in Europe and in other Western nations.
d. Incorrect. Canon law was a very important body of church law that both
complemented and competed with the law merchant, but it did not
provide the foundation for the law of negotiable instruments.
3.
You write a check to pay for your haircut. In this transaction, who is the
drawee?
a. You are, because you drew up the check.
b. Your bank is, because it must pay the check.
c. The person who cuts your hair is, because the check is payable to that
person.
d. There is no drawee in this transaction.
Answers:
a. Incorrect. In this transaction you are the drawer.
b. Correct. When a check is written, the bank upon which it is drawn is
always the drawee.
c. Incorrect. The person who cut your hair is the payee.
d. Incorrect. A check or draft does involve a drawee, as well as a drawer
and a payee.
4.
Answers:
a.
b.
c.
d.
5.
Answers:
a. Correct. An oral promise cannot be negotiable because negotiable
instruments must be in writing.
b. Incorrect. Negotiable instruments must be payable on demand or at a
specific time.
c. Incorrect. An essential element of negotiable instruments is that they
are not revocable.
d. Incorrect. A promissory note must be in writing in order to be
negotiable.
6.
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d. By no one.
Answers:
a. Correct. The party making the promise to pay must sign the CD.
b. Incorrect. The party who will receive payment does not need to sign
the CD for it to be negotiable.
c. Incorrect. The promisee is the party receiving the promise of payment,
and that person need not sign the CD for the CD to be negotiable.
d. Incorrect. The maker (the bank) must sign the CD.
7.
Answers:
a. Incorrect. The drafters of the UCC were concerned with increasing the
utility of negotiable instruments as money substitutes or as credit
devices.
b. Incorrect. The drafters of the UCC were not trying to make fraud less
difficult.
c. Correct. The drafters of the UCC wanted to encourage the smooth flow
of commercial transactions, not hinder these transactions.
d. Incorrect. The drafters of the UCC did want to promote the use of the
instruments as credit devices but not in order to increase the
bankruptcy rates.
8.
Answers:
a. Incorrect. Presentment happens when a person presents an
instrument to the party liable on the instrument for paymentin this
case, the bank.
b. Incorrect. Presentment does not occur in this situation.
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c. Correct. Because the bank is liable for payment, presentment occurs
when the payee presents the check to the bank.
d. Incorrect. Presentment occurs before the bank returns your canceled
check.
9.
Answers:
a. Incorrect. An acceleration clause deals with payment of a negotiable
instrument, not with the sale of a good.
b. Correct. An acceleration clause accelerates payment.
c. Incorrect. This describes an extension clause, not an acceleration
clause.
d. Incorrect. An acceleration clause does not give a holder the power to
change a statute of limitations.
10. An extension clause in a negotiable instrument is:
a. another word for an acceleration clause.
b. the reverse of an acceleration clause.
c. an addition to an instrument that renders it nonnegotiable.
d. a promise to pay in goods rather than money.
Answers:
a. Incorrect. An extension clause is the reverse of an acceleration clause.
b. Correct. An extension clause is the reverse of an acceleration clause
because the extension clause allows the date of maturity of an
instrument to be extended into the future, not accelerated.
c. Incorrect. An extension clause in a note does not render the note
nonnegotiable.
d. Incorrect. This is not what an extension clause is.