UNIVERSITY OF THE EAST

Caloocan Campus
COLLEGE OF BUSINESS ADMINISTRATION
DEPARTMENT OF ACCOUNTANCY, BUSINESS LAW AND TAXATION
www.ue.edu.ph/caloocan 105 Samson Road, Caloocan City

BBL 113 – LAW ON NEGOTIABLE INSTRUMENTS

2nd SEMESTER, SCHOOL YEAR 2015 – 2016
FINAL DEPARTMENTAL EXAMINATION

GENERAL DIRECTION: Read and analyze the foregoing questions and choose the
best answer by shading the letter of your choice in your respective Scantron Answer
Sheet. Strictly no erasures allowed in the Scantron Answer Sheet.

Theories (50 Items @ 1 pt. each)

1. A person who is in possession of a bill or note and who has the right to demand
payment:
a) Possessor
b) Indorsee
c) Drawee
d) Holder
e) None of the above

2. It is an act of informing the parties who are secondarily liable that the party
primarily liable refused to pay the holder of the instrument on its due date:
a) Dishonor by Non-Acceptance
b) Presentment for Acceptance
c) Notice of Dishonor by Non-Payment
d) Notice of Dishonor by Non-acceptance
e) None of the above

3. Exist when presentment is excused and the negotiable instrument is overdue and
unpaid:
a) Dishonor by Non-Acceptance
b) Presentment for Acceptance
c) Notice of Dishonor by Non-Payment
d) Notice of Dishonor by Non-acceptance
e) None of the above

4. Is one composed of several parts, each part being numbered and containing a
reference to other parts, the whole of the parts constituting but one bill?
a) Bill in set
b) Bill of Exchange
c) Due Bill
d) Bill of Lading
e) None of the Above

5. Lola Nidora issued a promissory note in favour of Frankie Arinolie in the amount
of Php 10,000.00 payable after ten days from today. When Frankie received the
said promissory note, he negotiated it to Tidora. The following day, TIdora
negotiated the said promissory note back to Lola Nidora. In this case:
a) The instrument is discharged by merger.
b) The instrument is discharged by compensation.
c) The instrument cannot be negotiated further to third person

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 d) Both a and c
e) None of the above

6. Which of the following does not connotes a restrictive indorsement?

a) Pay to principal “Maine”
b) Pay to “Maine” only
c) Pay to “Maine” in trust of “Yaya”
d) Pay to “Maine”, agent of “Yaya”
e) None of the above

7. A negotiable bill of exchange payable on December 25, 2016 may be presented

for payment on:
a) Before December 25, 2016 and which is not a holiday
b) Sunday
c) Holiday
d) December 25, 2016
e) None of the above

8. A check which bears across its face two (2) parallel lines diagonally, using on the
upper left side:
a) Traveller’s check.
b) Certified check
c) Cashier’s check
d) Crossed check
e) None of the above

9. A check which the holder’s signature must appear twice, one to be affixed by him
at the time it is issued and the second or counter signature, to be affixed by him
before it is paid, otherwise it is incomplete:
a) Traveller’s check.
b) Certified check
c) Cashier’s check
d) Crossed check
e) None of the above

10. Is a formal statement in writing made by a notary public under the seal of this
office at the request of the holder of a foreign bill of exchange in which it is
declared that the same was on a certain day presented for acceptance and such
acceptance was refused?
a) Notice of Dishonor.
b) Protest
c) Discharged
d) Special Power of Attorney
e) None of the above

11. A promissory note is distinguished from a Bill of Exchange-

a) It contains unconditional order.
b) The one who issues is primarily liable.
c) The one who issues is secondarily liable.
d) There are three (3) parties, the drawer, the payee and the drawee
e) None of the above.

12. A demand promissory note must be presented for payment?

a) Within a reasonable time after its issuance.
b) Within a reasonable time after the last negotiation.
c) Within a reasonable time after the last indorsement.
d) All of the above.
e) None of the Above

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13. An instrument is antedated when it contains a date:
a) Later than the date of issuance.
b) Earlier than the true date of its issuance.
c) The exact date of its issuance.
d) The next succeeding business day.
e) None of the above.

14. If a signature appears on an instrument and you do not know as to what capacity
the said person signed the instrument, he will be considered as?
a) Drawee.
b) Maker.
c) Acceptor.
d) Maker.
e) None of the above.

15. He admits the existence of the payee and his capacity to indorse:
a) Drawee.
b) Maker.
c) Acceptor.
d) Maker.
e) None of the above.

16. Which of the following statements pertaining to indorsement is incorrect:

a) The indorsement must be of the whole instrument.
b) The signature of the indorser without additional words is sufficient.
c) Indorsers are liable in the order in which they indorse.
d) All of the above.
e) None of the above.

17. A holder in due course is one who has taken the instrument under the following
conditions. Choose which is not.
a) That he took it with the knowledge of the indorser.
b) That he became the holder of it before its maturity date.
c) That the instrument is complete and regular upon its face.
d) That he took it in good faith and for value.
e) None of the above.

18. A promissory note states: “I promise to pay to the order of Alden, the sum of Php
10,000.00. (signed) Yaya Dub. The said note was delivered to Alden by the
maker Yaya Dub. Thereafter, Yaya Dub paid Alden the amount of Php 3,000.00,
after which Alden indorsed the instrument to Frankie in this wise: “Pay to Frankie,
Php7,000.00 signed “Alden”. Which of the following statements is correct?
a) Frankie is not a holder but a mere assignee.
b) The indorsement is not valid since it was made partially.
c) The indorsement is valid since it is an indorsement of the residue of the
value of the check
d) Both b and c.
e) None of the above.

19. This is personal defense under the Negotiable Instrument Law?

a) Fraud in factum
b) Esse contractus.
c) Incomplete but delivered instrument.
d) Incomplete and undelivered instrument.
e) None of the above

20. This is real defense under the Negotiable Instrument Law?

a) Fraud in inducement
b) Insertion of wrong date.
c) Incomplete but delivered instrument.

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 d) Want of delivery.
e) None of the above

21. “I promise to give Nidora Php100,000.00 on December 20,2016, if the sun rises
tomorrow.” The instrument is?
a) Negotiable
b) Conditional indorsement
c) Not negotiable
d) All of the above
e) None of the above

22. Statement 1 – Where an instrument is payable to the order of two or more

payees or indorsees who are not partners anyone can indorse unless the one
indorsing has no authority for the others.
Statement 2 – An indorsement may be written on a separate sheet which is
attached to the instrument.
Statement 3 – A holder may still be a holder in due course even if the instrument
is not dated.
a) All statement are true.
b) All statement are false.
c) Both statement 1 and 2 are false; statement 3 is true.
d) Both statements 1 and 2 are true; statement 3 is false.
e) None of the above.

23. A, B and C secured a loan from X. The promissory note which evidences the
obligation states: “ I promise to pay to the order of X, Php 100,000.00 ” and
signed by A, B and C. The obligation in the instrument is :
a) Joint
b) Divisible
c) Solidarily
d) Indivisible
e) None of the above

24. A and B are pro rata creditors of debtors X and Y to a total sum of Php9,000.00.
A owns 1/3 of the credit and B owns 2/3 of it. But X owes 2/5 of the debts and Y
owes 3/5 of the debts. In this case.
a) B can only collect from X, Php5,400.00 and form Y Php3,600.00.
b) A can only collect from X, Php4,500.00 and form Y Php4,500.00.
c) A can only collect from X Php3,600.00 and form Y Php5,400.00
d) B can collect from X, Php9000.00 and form Y zero.
e) None of the above.

25. Is a separate paper attached to a negotiable instrument where an indorsement of

the acceptance of a bill of exchange is written:
a) Allonge
b) Annex
c) Addition
d) Alluvion
e) None of the above

26. Is an act wherein an instrument is transferred form one person to another in

such a manner as to constitute the transferee the holder thereof:
a) Valuation.
b) Adjustment
c) Actuarial.
d) Negotiation
e) None of the above.

27. The money or currency which the debtor may compel the creditor to accept in the
payment of a debt, whether public or private is known as:

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 a) Notes payable
b) Legal tender
c) Bill of exchange
d) Mercantile document
e) None of the above

28. Statement 1 –A written notice of dishonour must be signed.

Statement 2 – Accceptance can be made in an allonge.
Statement 3 – The agent of a holder under his own name can validly give notice of
dishonour to the parties secondarily liable.
a) All statements are true.
b) All statements are false.
c) Both statements 1 and 2 are false; statement 3 is true.
d) Both statements 1 and 2 are true; statement 3 is false.
e) None of the above.

29. Darren signs a promissory note amounting to Php100,000.00 merely for the
purpose of lending his name to accommodate Trina. In this case, if Trina
negotiated the instrument to Gavin who is the true debtor?
a) Darren.
b) Both Darren and Trina.
c) Trina
d) Gavin
e) None of the above

30. Is an indorsement which prohibits the negotiability of the instrument to a

particular person or for a particular purpose?
a) Qualified indorsement.
b) Restrictive Indorsement.
c) Special Indorsement
d) None of the above.
e) All of the above.

31. Is an indorsement that specifies the person to whom, or to whose order, the
instrument is to be payable:
a) Qualified indorsement.
b) Restrictive Indorsement.
c) Special Indorsement
d) None of the above.
e) All of the above.

32. Is an indorsement which prohibits the negotiability of the instrument to a

particular person or for a particular purpose.
a) Qualified indorsement.
b) Restrictive Indorsement.
c) Special Indorsement
d) None of the above.
e) All of the above.

33. An instrument originally negotiable ceases to be negotiable when:

a) Qualifiedly indorsed.
b) Restrictively Indorsed.
c) Special Indorsed
d) Conditionally indorsed
e) None of the above.

34. A general indorser is one who.

a) Indorses the instrument before its delivery to the payee
b) Indorses the instrument in blank
c) His liability shall only extend to all parties subsequent to him..

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 d) None of the above
e) All of the above

35. Payment in due course of a negotiable instrument must be made by the principal
debtor:
a) Before maturity
b) At or after maturity
c) When he wishes
d) When his means permits him to do so
e) None of the above

36. Statement 1 – Where there are several persons not partners primarily liable on
the instrument and no place of payment is specified, presentment must be made
to them all.
Statement 2 – Creditors are bound to accept checks in payment of the debtor’s
obligation.
Statement 3 –Where there are several persons who are partners primarily liable
on the instrument and no place of payment is specified presentment may be
made to any one of them even though there has been dissolution of the firm.
a) All statement are true
b) All statement are false
c) Statement 1 is true; Statement 2 is false; Statement 3 is true
d) Statement 1 is true; Statement 2 is true; Statement 3 is false
e) None of the above

37. The following, except one, are the rights of a holder in due course. Which is the
exception:
a) To receive payment thereof
b) To sue on the instrument in his own name
c) To enforce payment of the instrument for the full amount thereof against
all parties liable thereon;
d) To hold the instrument subject to defences as if it were non-negotiable
e) None of the above.

38. Statement 1 – A signature by “procuration” operates as notice that the agent has
but a limited authority to sign.
Statement 2 – A conditional endorsement renders the instrument non-negotiable.
Statement 3 – The maker is secondarily liable.
a) All statement are true
b) All statement are false
c) Statement 1 is true; Statement 2 is false; Statement 3 is true
d) Statement 1 is true; Statement 2 is true; Statement 3 is false
e) None of the above

39. The acceptor has the following warranties. Which is not?

a) He warrants that he will pay according to the original tenor.
b) He warrants that the signature of the drawer is genuine.
c) He warrants that the payee is existing
d) He warrants that the drawer is capacitated to draw the bill.
e) None of the above

40. This party to the instrument admits the existence of the payee and his then
capacity to indorse and engages that on due presentment the instrument will be
accepted or paid, or both according to its tenor and that if it be dishonoured and
the necessary proceedings on dishonour be duly taken, he will pay the amount
thereof to the holder or to any subsequent endorser who maybe complied to pay
it. This liability refers to:
a) Payee c) Acceptor
b) Drawer d) Maker e) None of the above

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41. M makes a promissory note payable to the order of P who indorses the same in
this manner. Pay to A at indorsee’s own risk. (signed) P”. In case M’s signatures
is a forgery, which of the following statements is correct?
a) M is still liable to A because as a maker, one of the liabilities is to pay the
holder.
b) P is not liable to A in case M refuses to pay A since P is a qualified
indorser.
c) Both a and b
d) All of the above
e) None of the above

42. The acceptor does not warrant the :

a) Genuineness of drawer’s signature
b) Existence of the payee
c) Due execution of the instrument
d) Capacity of the payee to indorse
e) None of the above

43. The following are warranties of a qualified indorser, except:

a) Instrument is genuine in all respects what it purports to be
b) He has good title to it
c) All prior parties had capacity to contract
d) He has no knowledge of any fact which would impair the validity of it.
e) None of the above

44. The validity and negotiable character of an instrument are not affected by the
following omissions, except:
a. It is not dated
b. Does not specify the value given of that any value has been given.
c. Does not specify the place it is drawn or where it is payable.
d. Does not specify the currency in which payment is to be made.
e. None of the above

45. When a negotiable instrument has been dishonoured by non-acceptance or non-

payment, notice of dishonour must be given to the following, otherwise they are
discharged:
a) Maker.
b) Drawer.
c) Drawee.
d) Acceptor
e) All of the above.

46. The sum payable is a sum certain, although it is to be paid:

a) With interest.
b) By stated installments.
c) With exchange.
d) All of the above.
e) Answer not given.

47. Which of the following is not negotiable?

a) “I agree to pay to the order of Yaya, P30,000” Sgd. Arinoli
b) “Good to Tidora or order, P30,000”, Sgd. Lola Nidora
c) “ I promise to pay Alden or order P30,000 on June 30” Sgd. M.
d) “I promise to pay P or order P5,000.” Sgd. M
e) None of the above

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48. A bill of exchange may be treated as a promissory note:
a) When the drawee and the payee are the same persons
b) When the drawer and the payee are the same persons
c) When the drawee and the drawer are the same persons
d) All of the above
e) None of the above

49. Payable to Bearer

a) Pay to Bearer Darren, P2,000
b) Pay to Darren, the bearer, P2,000
c) Pay to Possessor, P2,000
d) All of the above
e) None of the above

50. Statement 1 – A signature by “procuration” operates as notice that the agent has
unlimited authority to sign and the principal is not liable in the instrument.
Statement 2 – A conditional endorsement renders the instrument negotiable.
Statement 3 – The maker is primarily liable.
a) All statement are true
b) All statement are false
c) Statement 1 is true; Statement 2 is false; Statement 3 is true
d) Statement 1 is true; Statement 2 is true; Statement 3 is false
e) None of the above

-End of examination-

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