Coverage: Negotiable Instruments Law (ACT No.

2031)

1. The Negotiable Instruments Law is also known as

a. Act No. 2031
b. Act No. 3021
c. Act No. 2130
d. Act No. 3120

2. The following are the functions of negotiable instruments, except

a. They are substitutes for money.
b. They increase the purchasing medium in circulation.
c. They increase credit transactions.
d. They are intended as legal tender.

3. It is an attribute of a negotiable instrument which means that as the instrument is passed from one person to another, secondary
contracts are entered into thereby increasing the chances of the holder to collect the amount payable on the instrument.
a. Accumulation of secondary contracts
b. Negotiability
c. Assignability
d. Tenderability

4. It is an attribute of a negotiable instrument which allows it to be passed from one hand to another similar to money. so as to
give the holder in due course the right to hold the instrument and collect the sum payable, for himself free from personal
defenses available to prior parties.
a. Accumulation of secondary contracts
b. Negotiability
c. Assignability
d. Tenderability

5. The following are the distinctions between assignment of non-negotiable promissory note and negotiation by general
indorsement of negotiable promissory note, except
a. Assignment is applicable to non-negotiable promissory note while negotiation is applicable to negotiable promissory
note.
b. The transferee in assignment is called an assignee while the transferee in negotiation is called a holder.
c. The transferor in assignment is called an assignor while the transferor in negotiation is called a general indorser if there
is indorsement.
d. The assignee in assignment is subject to personal defenses available to prior parties while the holder in due course in
negotiation holds the instrument free from personal defenses available to prior parties.
e. The assignor does not warrant the solvency of maker unless expressly stated while the general indorser guarantees the
solvency of maker as long as notice of dishonor will be given to him.
f. Assignment of credit is governed by negotiable instruments law while negotiation is governed by law on sales.

6. The following are the kinds of negotiable instruments, except

a. Promissory Note
b. Bill of exchange
c. Checks
d. Bill of lading

7. Which of the following is a negotiable instrument?

a. Certificate of stock
b. Letter of credit
c. Trust receipt
d. Bond indenture of a bonds payable

8. Which of the following statements pertains to negotiable promissory note?

a. It is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on
demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer.
b. It is an unconditional order in writing addressed by one person (drawer) to another (drawee) signed by the person giving
it (drawer), requiring the person (drawee) to whom it is addressed to pay on demand or at a fixed or determinable future
time a sum certain in money to order or to bearer.
c. It is a special type of bill of exchange drawn on a bank payable on demand.
 9. Where the instrument is so ambiguous that there is doubt on whether it is a bill or a note, the holder may treat it as either at
his option. The following are the instances when a bill of exchange may be treated as a promissory note by the holder. except
a. Where the drawer and drawee are the same person.
b. Where the drawee is a fictitious person.
c. Where the drawee is a person not having a capacity to contract.
d. Where the drawer is a corporation

10. The following are the rules for the construction of the negotiable instrument where the language of the instrument is
ambiguous or there are omissions thereon, except
a. Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum
denoted by the words is the sum payable, but if the words are ambiguous or uncertain, reference may be had to the
figures to fix the amount.
b. Where the instrument provides for the payment of interest, without specifying the date from which interest is to run, the
interest runs from the date of the instrument, and if the instrument is undated, from the issue thereof.
c. Where the instrument is not dated, it will be considered to be dated as of the time it was issued.
d. Where there is a conflict between the hand written and printed provisions of the instrument, the hand written provisions
prevail.
e. Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as either at
his election.
f. Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same
intended to sign, he is deemed to be an indorser.
g. Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be
jointly liable thereon while where an instrument containing the words "We promise to pay" is signed by two or more
persons, they are deemed to be solidary liable.

11. Which of the following statements is incorrect?

a. The instrument need not follow the language of Act No. 2031, but any terms are sufficient which clearly indicate an
intention to conform to the requirements thereof.
b. Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed "prima facie" to be the
true date of the making, drawing, acceptance, or indorsement, as the case may be.
c. The person to whom ante-dated or post-dated instrument is delivered acquires title thereto as of the date of delivery.
d. The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to
him, the date so inserted is to be regarded as the true date.
e. The instrument is not valid for the reason only that it is ante-dated or post-dated even if it is not done for an illegal or
fraudulent purpose.

12. Under Section 6, the date is not necessary for the negotiability of the instrument. The following are the instances where the
date may be inserted to determine the date of maturity but not essential for negotiability, except
a. Where an instrument expressed to be payable at a fixed period after date is issued undated.
b. Where the acceptance of an instrument payable at a fixed period after sight is undated.
c. Where the instrument payable on demand is undated.

13. The signature of any party may be made by a duly authorized agent. No particular form of appointment is necessary for this
purpose; and the authority of the agent may be established as in other cases of agency. The following are the requisites for an
agent signing the instrument in behalf of principal to escape liability on the instrument, except
a. The agent must be duly authorized by the principal.
b. The agent must add words to his signature indicating that he signs as an agent, that is, for or on behalf of a principal, or
in representative capacity.
c. The agent must disclose his principal and need not be in the signature.
d. The authority of agent must be in a Notarized Special Power of Attorney.

14. In which of the following negotiable instruments shall the agent be personally liable?
a. Pay to A or order P1,000. Jose Cruz by: Pedro Vega (sgd)
b. Pay to A or bearer P1,000. (sgd) Pedro Vega for Jose Cruz
c. Pay to A or order P 1,000. (sgd) Pedro Vega as agent of Jose Cruz
d. Pay to A or bearer P 1,000. (sgd) Pedro Vega, agent

15. Which of the following persons whose signature appears in a negotiable instrument is liable thereon?
a. A person whose signature is merely forged by another person.
b. A person who signed in behalf of another person indicating that he is only signing as an agent and disclosing his
principal.
c. A person whose signature appears in a sheet of paper intended merely as an autograph.
d. A person who signs in a trade or assumed name.
16. It is a signature which operates as a notice that the agent has but limited authority to sign, and the principal is bound only in
case the agent is so signing acted within the actual limits of his authority.
a. Signature by preparation
b. Signature by procuration
c. Signature by presentation
d. Signature by preservation

17. The following are the possible parties in a negotiable promissory note after being negotiated, except
a. Maker who drew the promissory note and therefore primarily liable up to the extent of the tenor of the promissory note.
b. Payee who refers to the person to whom the promissory note is originally payable.
c. General indorser who signs and delivers the promissory note to the subsequent holder after its issuance by the maker
and therefore secondarily liable for the nonpayment of the promissory note. He negotiates the instruments by
indorsement coupled with delivery.
d. Person negotiating the promissory note by mere delivery who negotiates the instrument by mere delivery and therefore
not secondarily liable for the nonpayment of the promissory note unless there is violation of his warranties.
e. Holder who is the payee or indorsee of an order promissory note, who is in possession of it or the bearer of a bearer
promissory note.
f. Acceptor who assented to the order of the drawer and therefore primarily liable to the promissory note up to the extent
of his acceptance.

18. The following are the possible parties in a negotiable bill of exchange after being negotiated, except
a. Drawer who drew the bill of exchange and commanded the drawee and therefore secondarily liable for the
nonacceptance or nonpayment of the bill of exchange.
b. Acceptor refers to the drawee who assented to the order of the drawer and therefore primarily liable to the bill of
exchange up to the extent of the tenor of his acceptance.
c. Payee who refers to the person to whom the bill of exchanget is originally payable.
d. General indorser who signs and delivers the bill of exchange to the subsequent holder after its issuance by the drawer
and therefore secondarily liable for the non-acceptance or nonpayment of the bill of exchange. He negotiates the
instruments by indorsement coupled with delivery.
e. Person negotiating the bill of exchange by mere delivery who negotiates the instrument by mere delivery and therefore
not secondarily liable for the nonpayment of the bill of exchange unless there is violation of his warranties.
f. Holder who is the payee or indorsee of an order bill of exchange, who is in possession of it or the bearer of a bearer bill
of exchange.
g. Acceptor for honor is a third person who accepted the bill of exchange instrument to save the credit of the parties to the
bill of exchange or some party to it as the drawer, drawee, or indorser or somebody else by intervening the protested bill
of exchange and accepting it with the consent of the holder.
h. Referee in case of need is a person whose name is inserted by a drawer of a bill of exchange or any indorser to whom
the holder may resort in case of need; that is to say, in case the bill is dishonored by non-acceptance or non-payment.
i. Drawee who refers to the person who is addressed and commanded by the drawer to pay the bill of exchange.

19. The following are the essential requisites of a negotiable promissory note, except
a. It must be in writing and signed by the maker.
b. It must contain an unconditional promise to pay a sum certain in money.
c. It must be payable on demand, or at a fixed time or at a determinable future time.
d. It must be payable to order or bearer.
e. It must specify the place where the payment shall be made.

20. The following are the essential requisites of a negotiable bill of exchange, except
a. It must be in writing and signed by the drawer.
b. It must contain an unconditional order to pay a sum certain in money.
c. It must be payable on demand, or at a fixed time or at a determinable future time.
d. It must be payable to order or bearer.
e. Since it is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
f. The drawer or payee must be different persons.
21. Determine whether or not the following instruments are negotiable:
a. I promise to pay B or bearer the sum of P10,000. Sgd A.
b. Mr. Y will oblige X by paying Z or order P1,000 on his account. To X. Sgd Y.
c. I agree to pay to the order of B P1,000. Sgd. A
d. Good to X or order P1,000. Sgd. A.
e. Due X P1,000. sgd. A
f. Due X or order on demand P1,000. Sgd. A
g. Pay to X or bearer P 1,000 if he marries Z. To Z. Sgd. A
h. I promise to pay to B or order P1,000 ten days after the death of X. Sgd.A.
i. I promise to pay X or order P1,000 (30) days from this date January l, 2001, at 5% interest p.a. Sgd. A.
j. I promise to pay to B or order P 1,000 together with all sums that may be due to him on December 31,1950.
sgd A.
k. I promise to pay to B or order P 1,000 in candies. Sgd. A.
l. I promise to pay to B or his order USA $1,000 on December 31, 2050 exchange rate. Sgd. A
m. I promise to pay X or order P1,000 on or before December 2. Sgd A.
n. Pay to B or his assigns PI ,000. To X. Sgd. A
o. I promise to pay to the order of bearer P1,000. Sgd. A.
p. I promise to pay to B or his agent or his collector, the sum of P 1,000. Sgd. A
q. Payable to possessor P 1,000 on demand. Sgd A.
r. I promise to pay to bearer Kim P1,000. Sgd A.
s. I promise to pay to Andrea P1,000. Sgd. A.

22. The sum payable is sum certain for negotiable instruments although it is to be paid under the following instances,
except
a. With interest
b. By stated installments
c. By stated installments with escalation clause
d. With exchange, whether at a fixed rate or at a current rate.
e. With costs of collections or an attorney's fee
f. With delivery of a thing other than money

23. Which of the following instrument is not negotiable because the sum is not certain?
a. I promise to pay to B or order P 1,000 in installments.
b. I promise to pay to B or bearer P 1,000 in four equal monthly installments beginning January 1, 1985.
c. I promise to pay to the order of B the sum of P 100 in two installments as follows: (1) P45 on Feb. l, 1985
and (2) P55 on June 1, 1985.
d. Pay to B or order USA $1,000 on the December 31, 2016 exchange rate.
e. Pay to C or order P1,000 with 12% interest p.a. until paid and with collection costs and attorney's fee if not
paid at maturity.

24. A promise or order to pay is unconditional for negotiable instruments although coupled with the following, except
a. An indication of a particular fund out of which reimbursement is to be made.
b. An indication of a particular account to be debited with the amount.
c. A statement of the transaction which gives rise to the instrument.
d. An order or promise to pay out of a particular fund.

25. Which of the following instruments is non-negotiable because it is conditional order to pay?
a. Pay to B or order P1,000 and reimburse yourself out of my money on your hands.
b. Pay to B or bearer P1,000 and debit the amount to my receivable.
c. Pay to B or order P1,000 on account of contract of sale between you and ABC Inc.
d. Pay to B or order P1,000 out of my salary in the company.

26. The following are considered determinable future time, except

a. At a fixed period after date or sight.
b. On or before a fixed or determinable future time specified therein.
c. On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time
of happening be uncertain.
d. Payable upon a contingency upon the happening of the event.

27. Which of the following instruments is non-negotiable because it is not payable in a determinable future time?
a. 60 days after sight, pay to the order of J P1,000.
b. On or before December 31, 1985, I promise to pay X or order P1,000.
c. On the death of X, I promise to pay B or order PI ,000.
d. 10 days before the death of A, I promise to pay B or bearer P1,000.
e. I promise to pay X or bearer P1,000 10 days after B passes the bar examination.
f. I promise to pay X or order P1,000 when my means permit me to do so.
28. The following provisions do not affect negotiability of an instrument, except
a. Authorization of sale of collateral securities in case the instrument be not paid at maturity.
b. Authorization of confession of judgment if the instrument be not paid at maturity.
c. Waiver of the benefit the law intended for the advantage or protection of the obligor.
d. Giving the holder an election to require something to be done in lieu of payment of money.
e. An order or promise to do any act in addition to the payment of money.

29. Which of the following instruments is non-negotiable?

a. I promise to pay to B or order P1,000 on December 1, 1985, provided, however, that if this note is not paid
at maturity date, the ring pledged may be sold at public auction.
b. Six months after date, I promise to pay to B or order P 1,000 waiving the right to appeal and all of valuation
appraisement.
c. I promise to pay B or order P1,000 or 10 dogs at the option of holder.
d. I promise to pay to bearer P1,000 and to deliver him two cars.
e. I promise to pay B or order P1,000 or 5 cats.

30. The negotiable character of an instrument is not affected by the following circumstances, except
a. It is not dated.
b. It does not specify the value given, or than any value had been given therefore.
c. It does not specify the place where it is drawn or the place where it is payable.
d. It bears a seal.
e. It designated a particular kind of current money in which payment is to be made.
f. It is not signed by the maker or drawer.

31. The following are the instances when a negotiable instrument is payable on demand, except
a. Where it is expressed to be payable on demand, or at sight or on presentation.
b. Where no time for payment is expressed.
c. Where an instrument is issued, accepted, or indorsed when overdue, as regards to the person issuing,
accepting or indorsing it.
d. Where it is payable at a fixed period after date or sight.

32. The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his
order. An order instrument may be made payable to the order of the following payees, except
a. A payee, who is not maker, drawer, or drawee
b. The drawer
c. The maker
d. The drawee
e. Two or more payees jointly
f. One or some of several payees
g. The holder of an office for the time being
h. Bearer

33. The following instruments are payable to order, except

a. I promise to pay to the order of B P1,000.
b. Pay to the order of ourselves P100.00. To B.
c. I promise to pay to the order of myself P1,000.
d. Pay to yourself or order P1,000. To Y.
e. I promise to pay to A and B or order P1,000.
f. I promise to pay to the order of A or B P1,000.
g. I promise to pay to the order of cashier of CPAR Incorporated P1,000.
h. I promise to pay to the order of the bearer P1,000.

34. The following are the instances when the instrument is payable to bearer, except
a. When it is expressed to be so payable to bearer.
b. When it is payable to a person named therein or bearer.
c. When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person
making it so payable.
d. When the name of the payee does not purport to be the name of any person.
e. When the only or last indorsement is an indorsement in blank.
f. When it is payable to a specified person.

35. The following instruments are payable to bearer, except

a. Pay to bearer P1,000.
b. Pay to B or bearer P1,000.
c. Pay to the order of Pacman P1,000. (The issuer knew that the Pacman is a fictitious person.)
d. Pay to cash. Pay to the order of money. Pay to the order of cash.
e. Pay to X or order P1,000. To Y. Sgd G. Indorsement. Sgd Y.
f. Pay to bearer B P1,000.
36. Which of the following instruments is negotiable?
a. I promise to pay P or order P10,000 on Christmas Day. Sgd. M.
b. I promise to pay P or order P10,000 10 days before the death of Mr. Jerry Tom. Sgd. M.
c. I promise to pay P or order P10,000 when my means permit me to do so. Sgd. M.
d. I promise to pay P or order P10,000 on December 31, 2050. Sgd. M.

37. Which of the following instruments is payable on a determinable future time?

a. I promise to pay P or order P10,000. Sgd. M.
b. I promise to pay P or order P10,000 on December 1, 1901. Sgd. M.
c. I promise to pay P or order P10,000 on December l, 2050. Sgd. M.
d. I promise to pay P or order P10,000 on the death of Mr. Noli Failon. Sgd. M.

38. This stage in the life of negotiable instrument refers to the first delivery of the instrument complete in form to a
person who takes it as a holder.
a. Issuance
b. Negotiation
c. Discharge
d. Assignment

39. This stage in the life of negotiable instrument refers to the transfer of possession with intent to transfer title
consisting principally by placing the transferee in possession of the instrument.
a. Delivery
b. Donation
c. Succession
d. Occupation

40. This stage in the life of negotiable bill of exchange refers to exhibiting the bill to the drawee, and demanding that
he accepts it, that is, to signify his assent to the order or command of the drawer.
a. Presentment for acceptance
b. Presentment for payment
c. Acceptance
d. Discharge

41. The following are the instances when presentment for acceptance of a negotiable bill of exchange must be made
or instances when presentment for acceptance of negotiable bill of exchange is required, except
a. Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary
in order to fix the maturity of the instrument.
b. Where the bill expressly stipulates that it shall be presented for acceptance.
c. Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee.
d. Where the bill provides that presentment for acceptance is waived.

42. What is the effect if the holder of a bill of exchange who is required by the preceding number to present the bill
for acceptance fails to do so or fails to negotiate it within a reasonable time?
a. The drawers and all indorsers are discharged.
b. The instrument becomes non-negotiable.
c. The drawee becomes liable to the instrument.
d. The holder can collect the instrument from the drawee.

43. The following are the rules for the proper presentment of a bill of exchange for acceptance, except
a. Presentment for acceptance must be made by or on behalf of the holder at a reasonable hour, on a business
day and before the bill is overdue, to the drawee or some person authorized to accept or refuse acceptance
on his behalf.
b. Where a bill is addressed to two or more drawees who are not partners, presentment for acceptance must
be made to them all unless one has authority to accept or refuse acceptance for all, in which case
presentment may be made to him only.
c. Where the drawee is dead, presentment for acceptance may be made to his personal representative.
d. Where the drawee has been adjudged a bankrupt or an insolvent or has made an assignment for the benefit
of creditors, presentment for acceptance may be made to him or to his trustee or assignee.
e. Presentment for acceptance must be made to the drawer.

44. The following are the instances when presentment for acceptance is excused and a bill may be treated as
dishonored despite the absence of presentment for acceptance, except
a. Where the drawee is dead.
b. Where the drawee has absconded.
c. Where the drawee is a fictitious person.
d. Where the drawee a person not having capacity to contract by bill.
e. Where, after the exercise of reasonable diligence, presentment cannot be made.
f. Where, although presentment has been irregular, acceptance has been refused on some other ground.
g. Where the holder of a bill may present the bill for acceptance within reasonable time.
45. What is the effect where the holder of a bill drawn payable elsewhere than at the place of business or the residence
of the drawee has no time, with the exercise of reasonable diligence, to present the bill for acceptance before
presenting it for payment on the day that it falls due?
a. The delay caused by presenting the bill for acceptance before presenting it for payment will release the
drawers and indorsers.
b. The delay caused by presenting the bill for acceptance before presenting it for payment is excused and does
not discharge the drawers and indorsers.
c. The instrument is no longer negotiable.
d. The drawee becomes liable to pay the bill of exchange.

46. When is a negotiable bill of exchange dishonored by non-acceptance?

a. When it is duly presented for acceptance and such an acceptance as is prescribed by this Act is refused or
cannot be obtained.
b. When presentment for acceptance is excused and the bill is not accepted.
c. Either A or B.
d. Neither A nor B.

47. Which of the following statements is correct?

a. Where a bill is duly presented for acceptance and is not accepted within the prescribed time, the person
presenting it must treat the bill as dishonored by nonacceptance or he loses the right of recourse against the
drawer and indorsers.
b. When a bill is dishonored by nonacceptance, an immediate right of recourse against the drawer and indorsers
accrues to the holder and no presentment for payment is necessary.
c. Both A and B.
d. Neither A nor B.

48. This stage in the life of negotiable bill of exchange refers to the signification by the drawee of his assent to the
order or command of the drawer making the drawee an acceptor who is primarily liable to the bill of exchange up
to the tenor of his acceptance.
a. Acceptance
b. Dishonor by nonacceptance
c. Payment
d. Discharge

49. The following are the requisites of valid acceptance by drawee, except
a. It must be in writing.
b. It must be signed by the drawee.
c. It must not express that the drawee will perform his promise by any other means than the payment of money.
d. It must be on a separate notarized document.

50. Which of the following statements concerning acceptance of a negotiable bill by the drawee is incorrect?
a. The holder of a bill presenting the same for acceptance may require that the acceptance be written on the
bill, and, if such request is refused, may treat the bill as dishonored.
b. Where an acceptance is written on a paper other than the bill itself, it does not bind the acceptor except in
favor of a person to whom it is shown and who, on the faith thereof, receives the bill for value.
c. An unconditional promise in writing to accept a bill before it is drawn is deemed an actual acceptance in
favor of every person who, upon the faith thereof, receives the bill for value.
d. The drawee is required to accept the bill because he is a party to the instrument even before the acceptance.

51. What is the period allowed by law for the drawee to accept the bill?
a. The drawee is allowed 24 hours after presentment in which to decide whether or not he will accept the bill.
b. The drawee is allowed 48 hours after presentment in which to decide whether or not he will accept the bill.
c. The drawee is allowed 36 hours after presentment in which to decide whether or not he will accept the bill.
d. The drawee is allowed 12 hours after presentment in which to decide whether or not he will accept the bill.

52. If acceptance is given by the drawee, what is the date of acceptance?

a. Date of the presentation of the bill for acceptance.
b. Date of the actual acceptance.
c. Day before the date of the presentation of the bill.
d. Day after the date of the actual acceptance of the bill.
53. When is the drawee deemed or presumed to have accepted the bill presented to him by holder?
a. Where a drawee to whom a bill is delivered for acceptance destroys the bill.
b. Where a drawee to whom a bill is delivered for acceptance refuses within twenty-four hours after such
delivery or within such other period as the holder may allow, to return the bill accepted or non-accepted to
the holder.
c. Either A or B.
d. Neither A nor B.
54. When may a negotiable bill of exchange be accepted by the drawee?
a. A bill may be accepted before it has been signed by the drawer, or while otherwise incomplete, or when it is
overdue, or after it has been dishonored by a previous refusal to accept, or by nonpayment.
b. A bill may be accepted while it is incomplete, or when it is overdue, or after it has been dishonored by a
previous refusal to accept, or by nonpayment.
c. A bill may be accepted when it is already overdue
d. A bill may be accepted after it has been dishonored by a previous refusal to accept, or by nonpayment.
e. Any of the above.

55. A bill may be accepted before it has been signed by the drawer, or while otherwise incomplete, or when it is overdue,
or after it has been dishonored by a previous refusal to accept, or by nonpayment. But when a bill payable after
sight is dishonored by non-acceptance and the drawee subsequently accepts it, in the absence of agreement, when
is the holder entitled to have the bill accepted?
a. As of the date of the second presentment for acceptance.
b. As of the date of first presentment for acceptance.
c. As of the date of the actual acceptance.
d. As of the date of second refusal.
56. What are the two types of acceptance by the drawee of the bill of exchange?
a. General acceptance
b. Qualified acceptance
c. Either general/unqualified acceptance or qualified acceptance
d. Neither general acceptance nor qualified acceptance

57. The following are examples of qualified acceptance by acceptor. Which acceptance is unqualified or general
acceptance?
a. An acceptance to pay at a particular place unless it expressly states that the bill is to be paid there only and
not elsewhere.
b. Conditional; that is to say, which makes payment by the acceptor dependent on the fulfillment of a condition
therein stated.
c. Partial; that is to say, an acceptance to pay part only of the amount for which the bill is drawn.
d. Local; that is to say, an acceptance to pay only at a particular place.
e. Qualified as to time.
f. The acceptance of some, one or more of the drawees but not of all.

58. The following statements concerning qualified acceptance made by drawee are correct, except
a. The holder may refuse to take a qualified acceptance and if he does not obtain an unqualified acceptance, he
may treat the bill as dishonored by non-acceptance.
b. Where a qualified acceptance is taken, the drawer and indorsers are discharged from liability on the bill
unless they have expressly or impliedly authorized the holder to take a qualified acceptance, or subsequently
assent thereto.
c. When the drawer or an indorser receives notice of a qualified acceptance, he must, within a reasonable time,
express his dissent to the holder or he will be deemed to have assented thereto.
d. The qualified acceptance by the drawee of the instrument will make the instrument non-negotiable.

59. He is a person whose name is inserted by a drawer of a bill or any indorser to whom the holder may resort in case
of need; that is to say, in case the bill is dishonored by non-acceptance or non-payment.
a. Referee in case of need
b. Accommodation party
c. Acceptor for honor
d. Payor for honor

60. It refers to the action made by a stranger or third person to the instrument to save the credit of the parties to the
instrument or some party to it as the drawer, drawee, or indorser or somebody else by intervening the protested bill
of exchange and accepting it with the consent of the holder.
a. Acceptance for value
b. Acceptance for honor
c. Acceptance in due course
d. Acceptance in good faith
61. The following are the essential elements of the valid acceptance for honor made by a third person, except
a. The drawee has refused to accept the bill.
b. The bill has been duly protested for non-acceptance or has been duly protested for better security.
c. The acceptor for honor must be a third party or stranger to the bill.
d. The holder must give consent.
e. The bill is already overdue at the time of acceptance for honor.

62. The following are the formalities required by law for acceptance for honor, except
a. An acceptance for honor supra protest must be in writing.
b. It must indicate that it is an acceptance for honor.
c. It must be signed by the acceptor for honor.
d. The acceptance for honor must be the whole sum or amount stated in the bill.

63. Where an acceptance for honor does not expressly state for whose honor it is made, the law presumes that it is made
for the honor of the
a. Drawer
b. Drawee
c. Indorser
d. Payee

64. To whom shall the acceptor for honor of a bill be liable?

a. The acceptor for honor is liable to the holder and to all parties to the bill subsequent to the party' for whose
honor he has accepted.
b. The acceptor for honor is liable to the holder of the bill only.
c. The acceptor for honor is liable to the holder and to all parties of the bill.
d. The acceptor for honor is liable to the drawee and drawer only.

65. Which of the following is the liability or agreement of an acceptor for honor?
a. The acceptor for honor, by such acceptance, engages that he will, on due presentment, pay the bill according
to the terms of his acceptance provided it shall not have been paid by the drawee and provided also that is
shall have been duly presented for payment and protested for non-payment and notice of dishonor given to
him.
b. The acceptor for honor engages that he will pay the whole sum of the instrument.
c. The acceptor for honor engages that he will pay value of the instrument in all cases.
d. The acceptor for honor engages that he will pay the instrument if the indorsers will not be able to pay the
instrument in all instances.
66. Where a bill payable after sight is accepted for honor, its maturity date shall be counted from the
a. Date of the noting for non-acceptance.
b. Date of the acceptance for honor.
c. Date of the issuance of the instrument.
d. Date of the delivery of the instrument.

67. This stage in the life of negotiable instruments refers in the transfer of an instrument from one person to another as
to constitute the transferee the holder of the instrument.
a. Assignment
b. Negotiation
c. Discharge
d. Transfer

68. How may an instrument payable to bearer or bearer instrument be negotiated?

a. It may be negotiated by mere indorsement.
b. It may be negotiated by indorsement with delivery of the instrument.
c. It may be negotiated by mere delivery.
d. Either B or C
69. How is instrument payable to order or order instrument negotiated?
a. It is negotiated by mere indorsement.
b. It is negotiated by indorsement with delivery of the instrument.
c. It is negotiated by mere delivery
d. Any of the above.

70. What is the effect if an instrument originally payable to bearer is negotiated by indorsement plus delivery?
a. It remains to be a bearer instrument that may be negotiated by mere delivery because an originally bearer
instrument is always a bearer instrument.
b. It becomes an order instrument that must be negotiated by indorsement plus delivery.
c. It becomes a non-negotiable instrument.
d. It is equivalent to assignment of credit.
71. In case an instrument payable to order is merely delivered without indorsement, which is true?
a. The transferee becomes a holder of a negotiable instrument.
b. The transferee shall not be subject to personal defense.
c. The transferee acquires the right to compel the transferor to indorse the instrument to the former so that he
will become a holder.
d. The transferee cannot collect the amount from the maker under any instances.

72. It is the method of transferring a non-negotiable instrument whereby the assignee is merely placed in the position
of the assignor and acquires the instrument subject to all defenses that might have been set up against the original
payee. It occurs in a negotiable instrument payable to order that is negotiated by mere delivery.
a. Indorsement
b. Assignment
c. Negotiation
d. Discounting

73. M, issued a promissory note payable to bearer to A. A negotiated it to B by delivery. B negotiated it to C by Special
Indorsement coupled with delivery. C negotiated it to D by Special Indorsement coupled with delivery. D negotiated
it to E by mere delivery. To whom shall B liable?
a. C, D and E
b. C only
c. C and D only
d. C, D and E only
74. M, issued a promissory note payable to order to A. A negotiated it to B by blank indorsement. B negotiated it to C
by mere delivery. C negotiated it to D by Special Indorsement coupled with delivery. D negotiated it to E by mere
delivery. Is the negotiation to E valid?
a. Yes because of blank indorsement.
b. No because the instrument is payable to order.
c. Yes because instrument payable to bearer can be converted to order instrument.
d. No because order instrument is always order instrument.

75. The following statements concerning indorsement of negotiable instrument are correct, except
a. The indorsement must be written on the instrument itself or upon a paper attached thereto.
b. The signature of the indorser, without additional words, is a sufficient indorsement.
c. The indorsement must be an indorsement of the entire instrument.
d. When the instrument has been paid in part, it may be indorsed as to the residue.
e. The indorsement or assignment of the instrument by a corporation or by an infant passes the property therein,
notwithstanding that from want of capacity, the corporation or infant may incur no liability thereon.
f. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which
purports to transfer the instrument to two or more indorsees severally is a valid negotiation of the instrument.

76. It is a paper which is attached to a negotiable instrument and where the indorsement is written.
a. Allonge
b. Attache
c. Align
d. Average

77. Which of the following statements concerning the indorsement of negotiable instruments is correct?
a. Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument
as therein described adding, if he thinks fit, his proper signature.
b. Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms
by indicating that he is merely an agent and disclosing his principal to negate personal liability.
c. Both A and B.
d. Neither A nor B.
78. What is the prima facie presumption of law regarding the time of indorsement where an instrument does not bear
date after the maturity of the instrument?
a. Every negotiation is deemed prima facie to have been effected before the instrument was overdue.
b. Every negotiation is deemed prima facie to have been effected after the instrument was overdue.
c. Every negotiation is deemed prima facie to have been effected at maturity date.
d. None of the above.
79. What is the prima facie presumption of law regarding the place of indorsement in the absence of contrary evidence?
a. Every negotiation is deemed prima facie to have been effected at the place where the instrument is dated.
b. Every negotiation is deemed prima facie to have been effected at the place where the instrument is accepted.
c. Every negotiation is deemed prima facie to have been effected at the place where the instrument is issued
originally.
d. Every negotiation is deemed prima facie to have been effected at the place where the instrument is
discharged.

80. When does an originally negotiable instrument stop to be negotiable?

a. When it is restrictively indorsed with words indicating "payable to indorsee only" or "payable to no other
person than indorsee".
b. When it is discharged by payment in due course or other modes of discharging the negotiable instrument.
c. Either A or B.
d. Neither A nor B.
81. In case an instrument payable to order is merely delivered without indorsement and the transferor indicates the
indorsement at a date later than the date of delivery, when does the negotiation takes effect for the purpose of
determining whether the transferee is a holder in due course?
a. At the time the indorsement was actually made.
b. At the time of the delivery of instrument.
c. At the time of filing the case to compel the transferor to indicate the indorsement.
d. At the time of the original issuance of instrument.

82. Which of the following statements is true if a holder negotiates the instrument to a prior party?
a. The prior party may reissue and further negotiate the instrument if he is not an accommodated party by the
maker or acceptor and the instrument is not yet discharged by any other means.
b. The instrument is automatically discharged even if the prior party is a general indorser.
c. After maturity date, the instrument may still be renegotiated by the prior party even if he is the accommodated
party by the maker or acceptor.
d. The prior party is entitled to enforce payment of the instrument against any intervening party to whom he
was primarily liable.

83. Where an instrument is payable to the order of two or more payees or indorsees who are not partners, who must
indorse the instruments to effectuate valid negotiation?
a. All of two or more payees or indorsees unless the one indorsing has the authority to indorse for others.
b. Anyone of the payees because the instrument is presumed to be solidary.
c. Anyone of the payees because the payees are presumed to be partners.
d. Anyone of the payees because there is presumption of mutual agency among the payees.

84. Where an instrument is payable to the order of two or more payees or indorsees who are partners, who must indorse
the instruments to effectuate valid negotiation?
a. All of two or more payees or indorsees unless the one indorsing has the authority to indorse for others.
b. Anyone of the payees only if there is authority given by majority of the partners.
c. Anyone of the payees only if there is authority given by all of the partners,
d. Anyone of the payees because there is presumption of mutual agency among the payees.

85. Where an instrument is drawn or indorsed to a person as "cashier" or other fiscal officer of a bank or corporation,
it is deemed prima facie to be payable to the bank or corporation of which he is such officer. Who must negotiate
the instrument for the negotiation to be valid under Act No. 2031?
a. It may be negotiated by the indorsement of the bank or corporation.
b. It may be negotiated by the indorsement of such officer of the bank or corporation.
c. Either A or B.
d. Neither A nor B.
86. Which of the following indorsements is valid assuming the amount of the instrument is P1,000?
a. Pay to X P400. Sgd Indorser
b. Pay to C P600 and Pay to D P400. Sgd Indorser
c. Pay to A or B P1,000. Sgd Indorser
d. Pay to A and B P1,000. Sgd Indorser
e. Assuming P400 has already been paid, Pay to A P600. Sgd Indorser

87. Which of the following indorsements is invalid assuming the amount of the instrument is P1,000?
a. Pay to A and B P1,000. Sgd Indorser
b. Pay to A P1,000. Sgd by Minor Indorser.
c. Pay to P1,000, Sgd. Indorser.
d. Sgd. Indorser
88. Which of the following definitions of the kinds of indorsement refers to facultative indorsement?
a. It is an indorsement which specifies the person to whom, or to whose order, the instrument is to be payable,
and the indorsement of such indorsee is necessary to the further negotiation of the instrument. This type of
indorsement will revert an originally order instrument converted to bearer instrument by blank indorsement
to its original character of being an order instrument.
b. It is an indorsement which specifies no indorsee and an originally order instrument so indorsed becomes a
bearer instrument that may be negotiated by mere delivery.
c. It is an indorsement which either prohibits the further negotiation of the instrument, or constitutes the
indorsee the agent of the indorser or vests the title in the indorsee in trust for or to the use of some other
person. But the mere absence of words implying power to negotiate does not make an indorsement this kind
of indorsement.
d. It is the ordinary type of indorsement without any qualification whereby making the indorser secondarily
liable to the instrument by guaranteeing the solvency of the person primarily liable provided notice of
dishonor is given to the indorser.
e. It is an indorsement that constitutes the indorser a mere assignor of the title to the instrument and may be
made by adding to the indorer's signature the words "without recourse" or any words of similar import and
such indorsement does not impair the negotiable character of the instrument.
f. It is an indorsement by which the indorser binds himself to pay, upon no other condition that the failure of
parties to do so and of due notice to him of such failure.
g. It is an indorsement which is subject to the happening of a condition but the party required to pay the
instrument may disregard the condition. But any person to whom an instrument so indorsed is negotiated
will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally.
h. It is an indorsement which waives the benefit provided by law to the indorsers. It is an indorsement wherein
the name of the indorsee is misspelled.

89. Indicate what type of indorsement is made in the following examples.

a. Pay to A. sgd. B
b. Sgd. B
c. Pay to C only. Sgd. B or Pay to C and no other person. Sgd. B
d. Pay to C for collection. Sgd. B or Pay to C for deposit. Sgd. B
e. Pay to X in trust for C. Sgd. B
f. Pay to X for the use of C. Sgd. B
g. Pay to C, at indorsee's risk. Sgd. B or Sans recourse, Pay to C. Sgd. B or Without recourse, Pay to C. Sgd.
h. Pay to X if he passed the board exam. Sgd. B
i. Pay to X, notice of dishonor waived. Sgd. B

90. The following are the effects of restrictive indorsement, except

a. Prohibits the further negotiation of the instrument
b. Constitutes the indorsee the agent of the indorser
c. Vests the title in the indorsee in trust for or to the use of some other person
d. Waives the benefit provided by law to the indorser.

91. Which of the following indorsements may render the instrument non-negotiable or may prohibit the further
negotiation of the instrument?
a. Conditional indorsement
b. Qualified indorsement
c. Restrictive indorsement
d. Facultative indorsement

92. This stage in the life of negotiable instruments consists of exhibiting the instrument to the person primarily liable
(acceptor in bill of exchange or maker of promissory note) thereon and demanding payment from him on the date
of maturity.
a. Presentment for acceptance
b. Presentment for payment
c. Acceptance
d. Discharge

93. Against whom shall presentment for payment be necessary for charging of liability?
a. As against maker
b. As against acceptor
c. As against drawer and general indorsers
d. As against qualified indorser
e. As against person negotiating by mere delivery
 94. As a general rule, presentment for payment is necessary to charge persons secondarily liable such as drawer and
general indorsers. The following are the instances when drawers and general indorsers are liable even without
presentment for payment, except
a. When the drawer has no right to expect or require the drawee or acceptor will pay the instrument.
b. Where the instrument was made or accepted for his accommodation and he has no reason to expect that the
instrument will be paid if presented.
c. When presentment is dispensed with.
d. When a bill is dishonored by non-acceptance.
e. When a bill has been accepted by the drawee.

95. The following are the instances when presentment for payment is dispensed with, except
a. When it cannot be made after the exercise of reasonable diligence.
b. When the drawee is a fictitious person.
c. When presentment is waived, express or implied.
d. When the bill has been accepted by the drawee.

96. Presentment for payment shall be made by the holder or some person authorized to receive payment in his behalf.
The following are the rules on when presentment for payment shall be made, except
a. If the instrument is payable at a fixed or determinable future time, presentment for payment must be made
on the day it falls due without grace period unless delay in presentment for payment is excused when it is
caused by circumstances beyond the control of the holder and not imputable to his default or negligence.
b. The time of presentment shall be on a reasonable hour on a business day and if payable at a bank, it must be
made during the banking hours.
c. A check must be presented for payment within a reasonable time (6 months) after its issue.
d. If the promissory note is payable on demand, presentment for payment must be made within a reasonable
time after issuance.
e. If the bill of exchange is payable on demand, presentment for payment must be made within a reasonable
time after its issuance.

97. The following are the rules on place of presentment for payment, except
a. If a place of payment is specified in the instrument, the presentment for payment shall be made there.
b. If no place is stipulated, but the address of the person primarily liable is given, the presentment for payment
shall be made there.
c. In the absence of a and b, presentment for payment shall be made on the usual place or residence of the
person making it.
d. In any other case if presented to the person to make payment wherever he can be found, or if presented at
his last known place of business or residence.
e. The presentment for payment shall always be made at the residence of the person holder.

98. The following are the persons to whom presentment for payment shall be made, except
a. To person primarily liable like maker or acceptor or party accommodated by maker or acceptor.
b. To any person found at the place where presentment for payment is made if the person primarily liable is
absent or inaccessible.
c. If the person primarily liable is dead, to his personal representative if there is one and if he can be found with
reasonable diligence.
d. If principal debtors are partners, to any one of them if no place of payment is specified.
e. If principal debtors are joint, to all of them if no place of payment is specified. f, To the guarantors of the
negotiable instruments.

99. This stage in the life of negotiable bill of exchange occurs when the bill is presented for acceptance, and acceptance
is refused by the drawee, or cannot be obtained, or when present for acceptance is excused, and the bill is not
accepted.
a. Dishonor by non-acceptance
b. Dishonor by non-payment
c. Dishonor by non-discharge
d. Dishonor by non-issuance

100. This stage in the life of negotiable instrument occurs when the instrument is presented for payment, and payment
is refused or cannot be obtained, or where presentment for payment is excused and the instrument is overdue and
unpaid.
a. Dishonor by non-acceptance
b. Dishonor by non-payment
c. Dishonor by non-issuance
d. Dishonor by non-accommodation
101. It must be given to the drawer and to each indorser in order to charge these persons who are secondarily liable to
the instrument.
a. Notice of dishonor
b. Protest
c. Petition
d. Subpoena

102. The purpose of notice of dishonor of nonpayment is to charge persons secondarily liable such as drawer and general
indorsers but not person primarily liable. The following are the instances when notice of dishonor of nonpayment
is waived, except
a. When the notice of dishonor is waived.
b. When notice of dishonor is dispensed with, when after the exercise of reasonable diligence, it cannot be
given or does not reach the parties sought to be charged.
c. When notice of dishonor by non-acceptance was previously given unless the instrument has been
subsequently accepted.
d. As regards to holder in due course without notice subsequent to the omission.
e. When the instrument has been accepted but subsequently dishonored for non-payment.

103. The following are the instances when notice of dishonor of nonpayment is not necessary to charge a drawer, except
a. When the drawer and drawee are the same person.
b. When the drawee is a fictitious person.
c. When the drawee is a person not having capacity to contract.
d. When the drawer is the person to whom the instrument is presented for payment.
e. Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument.
f. Where the drawer has countermanded payment.
g. When the drawee has dishonored the bill the instrument by non-acceptance or the acceptor has dishonored
the bill by non-payment.

104. The following are the instances when notice of dishonor of nonpayment is not necessary to charge a general
indorser, except
a. When the drawee is a fictitious person or a person not having a capacity to contract and the indorser was
aware of that fact at the time he indorsed the instrument.
b. Where the indorser is the person to whom the instrument is presented for payment.
c. Where the instrument was made or accepted for his accommodation meaning the indorser is the party
accommodated by maker or acceptor.
d. When the drawee has dishonored the instrument by non-acceptance or the maker/acceptor has dishonored
the instrument by non-payment.

105. Where notice is given by or on behalf of the holder, it inures to the benefit of all subsequent holders and all prior
parties who have a right of recourse against the party to whom notice is given. Where notice is given by or on behalf
of a party entitled to give notice, it inures to the benefit of the holder and all parties subsequent to the party to whom
notice is given. M makes a PN payable to the order of P. P indorses the note to A, A to B, B to C, C to H, holder.
H presents the note to for payment but M dishonors it. H notifies P, A, B and C. After giving the notice, H, holder
further negotiates the note to I, I to J, and J to K. Who benefited from the notice given by H to P?
a. A, B, C, only
b. I, J, K only
c. A, B, C, I, J, K
d. A, B, C, I only
106. Using the same data in preceding number, who benefited from the notice given to A, B, C by H?
a. I, J, K
b. P only
c. P, I, J, K
d. H only

107. Using the same data in preceding number, who may give notice upon dishonor?
a. H to P, A, B only
b. P to A
c. P to A and B
d. A to B and C
108. This stage of negotiable instruments happens upon payment in due course by or on behalf of the principal debtor.
It also occurs because of other modes provided by law for extinguishment of negotiable instrument,
a. Discharge
b. Issuance
c. Delivery
d. Negotiation

109. The following are the modes of discharging a negotiable instrument, except
a. By payment in due course by or on behalf of the principal debtor (maker of note or acceptor of bill)
b. By payment in due course by the party accommodated by maker or acceptor, where the instrument was made
or accepted for his accommodation
c. By the intentional cancellation, destroying, burning, or tearing of the instrument by the holder
d. By NO-CO-ME-RE-PA-LO-PRE-RE-FUL-AN
e. When the principal debtor becomes the holder of the instrument at or after maturity in his own right or by
merger or confusion
f. By payment of party secondarily liable

110. Payment in due course by or in behalf of the principal debtor discharges the instrument. The following are the
requisites of payment in due course. except
a. Payment must be made at or after maturity date.
b. Payment must be made to the holder.
c. Payment must be made by the debtor in good faith.
d. Payment must be made without notice of the holder's defective title.
e. Payment must be made using check

111. It refers to the payment made by a third person or stranger to a bill of exchange protested for nonpayment for the
honor of any person liable thereon or for the honor of the person for whose account it was drawn,
a. Payment for honor
b. Payment for value
c. Payment in due course
d. Payment in good faith

112. The following are the formal requisites provided by law for payment for honor supra protest, in order to operate as
such and result to legal subrogation and not as a mere voluntary payment by a third person, except
a. It must be attested by a notarial act of honor which may be appended to the protest or form an extension to
it.
b. The notarial act of honor must be founded on a declaration made by the payer for honor or by his agent in
that behalf declaring his intention to pay the bill for honor and for whose honor he pays.
c. It must be filed before the Intellectual Property Office.

113. Who shall be given preference in case two or more persons offer to pay a bill for the honor of different parties?
a. The person offering to pay the instrument in behalf of the payee.
b. The person offering to pay the instrument in behalf of the last indorser.
c. The person offering to pay the instrument in behalf of the holder.
d. The person whose payment will discharge most parties to the bill.

114. The following are the effects of the payment for honor by third person, except
a. All parties subsequent to the party for whose honor it is paid are discharged.
b. All parties prior to the party for whose honor it is paid are discharged.
c. The payer for honor is subrogated for, and succeeds to, both the rights and duties of the holder as regards the
party for whose honor he pays and all parties liable to the latter.
d. The party for whose honor the payer pays and all prior parties to the former are liable to the payer for honor.

115. Which of the following statements concerning payment for honor is correct?
a. Where the holder of a bill refuses to receive payment supra protest, he loses his right of recourse against any
party who would have been discharged by such payment.
b. The payer for honor, on paying to the holder the amount of the bill and the notarial expenses incidental to its
dishonor, is entitled to receive both the bill itself and the protest.
c. Both A and B
d. Neither A nor B.
116. The following are the modes of discharging party secondarily liable (drawer or general indorsers), except
a. By any act which discharges the instrument
b. By the intentional cancellation of the signature by the holder
c. By the discharge of prior party
d. By a valid tender of payment of a prior party
e. By release of a principal debtor, unless the holder's right of recourse against the parties secondarily liable is
reserved
f. By any agreement binding upon the holder to extend the time of payment
g. By giving notice of dishonor to party secondarily liable

117. The following are the effects of payment by a party secondarily liable, except
a. The instrument is discharged.
b. The party paying is remitted to his former rights as regards to all prior parties.
c. The party paying may strike out his own indorsement and all subsequent indorsements.
d. The party paying may renegotiate the instrument except where it is payable to the order of a third person and
has been paid by the drawer or where it was made or accepted for accommodation and has been paid by the
party accommodated.

118. The holder of a negotiable instrument may at any time strike or cancel out any indorsement not necessary to his
title. What are the effects of striking or cancelling out of indorsement?
I. The indorser whose indorsement is struck out is relieved from his liability on the instrument.
II. All subsequent indorsers are likewise relieved from their liability on the instrument.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

119. M issues a promissory note payable to order to A. A specially indorsed it to B coupled with delivery. B specially
indorsed it to C coupled with delivery. C specially indorsed it to D coupled with delivery. Which indorsement can
be stricken out or cancelled out by D?
a. A to B
b. B to C
c. C to D
d. None

120. M issues a promissory note payable to order to A. A specially indorsed it to B coupled with delivery. B specially
indorsed it to C coupled with delivery. C indorsed it in blank to D coupled with delivery. D specially indorsed it
to E coupled with delivery. E specially indorsed it to F coupled with delivery. Which indorsement can be stricken
out or cancelled out by F?
a. A to B
b. E to F
c. D to E
d. C to D

121. M issues a promissory note payable to bearer to A. A specially indorsed it to B coupled with delivery. B specially
indorsed it to C coupled with delivery. C indorsed it in blank to D coupled with delivery. D specially indorsed it
to E coupled with delivery, E specially indorsed it to F coupled with delivery. Which indorsement can be stricken
out or cancelled out by F?
a. A to B only
b. E to F only
c. D to E
d. Any indorsement

122. He refers to the payee or indorsee of a negotiable bill or note, who is in possession of it, or the bearer thereof.
a. Holder
b. Assignee
c. Transferee
d. Successor

123. He refers to the transferee of a non-negotiable bill or note or the possessor of an order negotiable instrument who is
not the indorsee or the payee at the same time.
a. Holder
b. Assignee
c. Predecessor
d. Maker
124. The following statements concerning consideration and value in relation to negotiable instruments are correct,
except
a. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration.
b. Every person whose signature appears in a negotiable instrument is presumed to have become a party thereto
for value.
c. Value is any consideration sufficient to support a simple contract.
d. An antecedent or pre-existing debt constitutes value and can be considered as value whether the instrument
is payable on demand or at a future time.
e. Where the holder has a lien on the instrument arising either from contract or by implication of law, he is
deemed a holder for value to the extent of his lien.
f. Lending a name constitutes value that will make the accommodating party primarily liable to the negotiable
instrument.
125. He refers to a person who gives valuable consideration for an instrument issued or negotiated to him and he will be
deemed as such in respect to all parties who become such prior to that time.
a. Holder in due course
b. Holder for value
c. Holder in bad faith
d. Holder in good faith

126. A, maker, issues a promissory note to B, who indorses it to C, C to D, D to E, now holder and last indorsee. B gives
to A no valuable consideration for the note. C is known to have given valuable consideration to B for the
indorsement of the note. Whether D and E gave valuable consideration is not known. Under the law, as to whom
shall E be considered a holder for value?
a. A, B, C and D
b. A, B and C
c. A and B
d. A only

127. He is one who has signed the instrument as maker, drawer, acceptor or indorser, without receiving value therefor,
and for the purpose of lending his name to some other person and he shall be liable to a holder for value,
notwithstanding such holder at the time of taking the instrument knew him to be acting as such.
a. Third party
b. Accommodation party
c. Stranger
d. Non-liable party

128. Who is the holder of an order negotiable instrument?

a. The possessor of it
b. The bearer of it
c. The payee or indorsee who is in possession of it
d. Any of the above

129. Who is the holder of a bearer negotiable instrument?

a. The possessor of it
b. The bearer of it
c. The payee or indorsee who is in possession of it
d. Any of the above

130. Which of the following statements pertains to a holder in due course?

a. He is holder who has given value for an instrument issued or negotiated to him.
b. He is a holder against whom personal defenses will not be available but against whom real defenses will lie.
c. He is a holder against whom both personal and real defenses can be used.

131. The following are the requisites of a holder in due course (COGI), except
a. He holds an instrument that is Complete and regular upon its face.
b. He becomes the holder of the instrument before it is Overdue, and without notice that it had been previously
dishonored if such was the fact.
c. He takes the instrument in Good faith and for value.
d. At the time the instrument is negotiated to him, he has no notice of Infirmity in the instrument or defect in
the title of the person of the person negotiating it.
e. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.
132. Which of the following statements is correct?
a. A holder in due course is always a holder for value,
b. A holder in due course is always a holder in good faith.
c. A holder for value is always in good faith.
d. Both A and B.

133. In which of the following instances is a holder still considered to be in due course even to a limited or partial extent?
a. Where an instrument payable on demand is negotiated to him on an unreasonable length of time after its
issue.
b. When the holder obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other
unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such
circumstances as amount to a fraud.
c. When the holder has actual knowledge of the infirmity or defect, or knowledge of such facts that his action
in taking the instrument amounted to bad faith.
d. Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person
negotiating the same before he has paid the full amount agreed to be paid therefore, he will be deemed a
holder in due course only to the extent of the amount therefore paid by him.

134. It is a type of defense of a party in a negotiable instrument which cannot be set up against a holder in due course but
available against a holder not in due course. It grows out of the agreement or conduct of a particular person in regard
to the instrument which renders it inequitable for him, though holding legal title, to enforce it against the defendant,
but which are not available against a holder in due course.
a. Movable defense
b. Immovable defense
c. Real, legal or absolute defense
d. Personal or equitable defense

135. It is a type of defense of a party in a negotiable instrument which can be set up against any holder. It is a defense
that attaches to the instrument itself and can be set up against the whole world.
a. Movable defense
b. Immovable defense
c. Real, legal or absolute defense
d. Personal or equitable defense

136. Which of the following defenses may be set up against any holder?
a. Fraud in factum
b. Fraud in inducement
c. Negotiation in breach of faith
d. Want of consideration

137. Which of the following defenses may not be set up against a holder in due course?
a. Incomplete and undelivered instrument
b. Minority
c. Forgery
d. Acquisition of instrument by duress or unlawful means

138. Which of the following defenses may be set up partially but not fully against a holder in due course?
a. Complete but undelivered instrument
b. Incomplete but delivered instrument
c. Material alteration
d. Duress amounting to forgery

139. Which of the following defenses may be set up against any holder?
a. Absence of delivery of complete instrument
b. Filling of black or contrary to authority given
c. Illegality of consideration
d. Fraud in esse contractus

140. The following constitutes material alteration, except

a. Alteration of date or sum payable, either principal or for interest
b. Alteration of the time or place of payment
c. Alteration of the number or relations of the parties
d. Alteration of the medium or currency of payment
e. Alteration which adds a place of payment where no place of payment is specified
f. Any other change or addition which alters the effect of the instrument
g. Adding an amount to incomplete instrument
 141. The following are the effects of material alteration, except
a. In the hands of a holder not in due course, the instrument is avoided as against the party prior to alteration.
b. Any holder, whether in due course or not, may enforce payment of new amount to a party who has himself
made, authorized or assented to the alteration and subsequent indorsers.
c. The instrument is not avoided in hands of holder in due course as against the party prior to alteration as to
the original amount but it will be avoided as to the excess.
d. The holder in due course can collect the new amount as against the party prior to alteration.
Personal or Equitable Defenses Real, Legal or Absolute Defenses
Absence or failure of consideration, partial or total Want/Absence of delivery of incomplete instrument (Incomplete and
Undelivered instrument)
Want/Absence of delivery of complete instrument (Complete but
undelivered instrument)
Filling of wrong date of an instrument where it is payable at a fixed period
after date and it is issued undated or where it is payable at a fixed period
after sight and the acceptance of blank
Filling up of blank. contrary to authority given or not within reasonable
time where the instrument is delivered (Delivered but incomplete
instrument)
Fraud in inducement Fraud in factum or fraud in esse contractus
Acquisition of instrument by force, duress or fear Duress amounting to forgery
Acquisition of instrument by unlawful means
Acquisition of the instrument for an illegal consideration Illegality of contract where it is the contract of instrument itself which is
expressly made illegal by statute
Negotiation in breach of faith Execution of instrument between public enemies
Negotiation under circumstances that amount to fraud
Mistake Forgery of signature of maker or acceptor or drawer
Forged indorsement or signature of indorser in case of bearer instrument Forged indorsement or signature of indorser in case of order instrument
Intoxication
Ultra vires acts of corporations where the corporation has the power to issue Ultra vires act of corporation, where the corporation is absolutely
negotiable paper but the issuance was not authorized for the particular prohibited by its charter or statute from issuing any commercial paper
purpose for which it is issued under any circumstances.
Want of authority of agent where he has apparent authority Want of authority of agent wherein the agent has no apparent authority
authori
Want/Absence of delivery (Delivered but incomplete instrument)
Illegality of contract where form or consideration is illegal
Insanity where there is no notice of insanity on the part of the one Insanity or Minority or Incapacity
contracting with the insane person
Material Alteration (May be enforced by Holder in Due Course according to original tenor) (Quasi-real Quasi-personal) It is a personal
defense as to the original amount but it is a real defense as to the excess of the original amount.
142. The following are the rights of a holder in due course, except
a. To sue on the instrument in his own name.
b. To receive payment of the instrument, and if the payment is in due course, the instrument is discharged.
c. To hold the instrument free from any defect of title of prior parties and free from defenses available to the
parties among themselves or free from personal defenses.
d. To enforce payment of the instrument for the full amount thereof against all parties liable thereon.
e. To hold the instrument free from real defenses.

143. May a holder not in due course enforce the instrument against a party prior to a holder in due course even if there
is personal defense present?
a. No in all instances.
b. Yes in all instances.
c. Yes if he derives his title through a holder in due course provided he is not a patty to any fraud or illegality
affecting the instrument also known as shelter rule.
d. Yes if he derives his title through a holder in due course even if he is a party to any fraud or illegality affecting
the instrument.

144. The following are the rights of a holder not in due course, except
a. To sue on the instrument in his own name.
b. To receive payment of the instrument, and if the payment is in due course, the instrument is discharged.
c. To hold the instrument but is subject to the same defenses as if were non-negotiable meaning subject to both
real and personal defenses.
d. To have all the rights of a holder in due course, if he derives his title from such holder and he himself is not
party to any fraud or illegality affecting the instrument
e. To hold the instrument free from personal defenses.

145. What is the liability of a maker by making the negotiable promissory note?
a. He engages that he will pay it if the general indorser will not pay it.
b. He engages that he will pay it only if notice of dishonor is given to him.
c. He guarantees the solvency of indorsers.
d. He engages that he will pay it according to its tenor.
146. What are the warranties of a maker in a negotiable promissory note by making the negotiable promissory note?
a. He admits the existence of the payee.
b. He admits the capacity of the payee to indorse.
c. Both A and B.
d. Neither A nor B.

147. What is the liability of Acceptor by accepting the order by the drawer in a negotiable bill of exchange?
a. He engages that he will pay it if the general indorser will not pay it.
b. He engages that he will pay it only if notice of dishonor is given to him.
c. He engages that he will pay it according to its tenor.
d. He engages that he will pay it according to the tenor of his acceptance.

148. The following are the warranties of Acceptor by accepting the order of the drawer in a negotiable bill of exchange,
except
a. He admits the existence of the payee.
b. He admits the capacity of the payee to indorse.
c. He admits the genuineness of the drawer's signature.
d. He admits the capacity and authority of the drawer to draw the instrument.
e. He guarantees the solvency of the general indorsers.

149. What is the liability of the Drawer by drawing the negotiable bill of exchange?
a. He engages that he will pay it if the general indorser will not pay it.
b. He engages that he will pay it according to its tenor.
c. He engages that he will pay it according to the tenor of his acceptance.
d. He engages that on due presentment, the instrument will be accepted or paid or both, according to its tenor,
and that if it be dishonored and the proceedings of dishonor be duly taken, he will pay the amount thereof
to the holder or to any subsequent indorser who may be compelled to pay it.

150. The following are the warranties of the Drawer by drawing the negotiable bill of exchange, except
a. He admits the existence of the payee.
b. He admits the capacity of the payee to indorse.
c. He admits the existence of the drawee.
d. He admits the capacity of the drawee to accept the bill.
e. He guarantees the solvency of the general indorsers.

151. What is the liability of the General Indorser by generally indorsing the negotiable instrument?
a. He engages that he will pay it even without notice of dishonor is given to him.
b. He engages that he will pay it according to its tenor.
c. He engages that he will pay it according to the tenor of his acceptance.
d. He engages that on due presentment, the instrument will be accepted or paid or both, according to its tenor,
and that if it be dishonored and the proceedings of dishonor be duly taken, he will pay the amount thereof
to the holder or to any subsequent indorser who may be compelled to pay it.

152. The following are the warranties of a General Indorser by generally indorsing the negotiable instrument, except
a. That the instrument is genuine and in all respects what it purports to be.
b. That he has good title to it.
c. That all prior parties had capacity to contract.
d. That the instrument, is at the time of his indorsement, is valid and subsisting.
e. That he has no knowledge of any fact which would impair the validity of the instrument or render it
valueless.

153. A qualified indorser is not secondarily liable to the instrument because he does not guarantee the solvency of the
person primarily liable. The following are the warranties of a Qualified Indorser by qualifiedly indorsing the
negotiable instrument although his warranties extend only to those parties who can trace their title from such
qualified indorsement, except
a. That the instrument is genuine and in all respects what it purports to be.
b. That he has good title to it.
c. That all prior parties had capacity to contract.
d. That he has no knowledge of any fact which would impair the validity of the intrument or render it valueless.
e. That the instrument, is at the time of his indorsement, is valid and subsisting.

154. A person negotiating the instrument by mere delivery is not secondarily liable to the instrument because he does
not guarantee the solvency of the person primarily liable. The following are the warranties of a person negotiating
the negotiable instrument by mere delivery but his warranties extend in favor of no holder other than the
immediate transferee, except
a. That the instrument is genuine and in all respects what it purports to be.
b. That he has good title to it.
c. That all prior parties had capacity to contract
d. That he has no knowledge of any fact which would impair the validity of the instrument or render it
valueless.
e. That the instrument, is at the time of his indorsement, is valid and subsisting.
155. Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he
is liable as indorser. What is the extent of the liabilities of this "irregular indorser"?
a. If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent
parties.
b. If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all
parties subsequent to the maker or drawer.
c. If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee.
d. Any of the above.
156. What is the presumption of law if joint payees or indorsees indorse the instrument jointly?
a. Jointly only
b. Jointly and severally or solidarily
c. Principally
d. Directly
157. Where a broker or other agent negotiates an instrument without indorsement or by mere delivery a bearer
instrument, what is the nature of liability of such broker or other agent if he fails to disclose the name of his
principal and the fact that he is acting only as agent?
a. He is liable like a person negotiating the instrument by mere delivery.
b. He is liable like a general indorser.
c. He is liable like a qualified indorser.
d. He is primarily liable like a maker or acceptor.
158. In a negotiable promissory note, who is primarily liable?
a. Maker
b. Indorser
c. Person negotiating the instrument by delivery
d. Acceptor

159. In a negotiable bill of exchange, who is primarily liable?

a. Drawer
b. Drawee
c. Acceptor
d. Indorser
e. Person negotiating the instrument by delivery

160. In case there is accommodation of a negotiable instrument, who is primarily liable?

a. Accommodating Drawee-Acceptor
b. Accommodating Maker
c. Accommodating Indorser
d. Party accommodated by Acceptor or Maker

161. In a negotiable instrument, who is secondarily liable for being guarantor of solvency of the person
primarily liable?
a. Drawer and General indorser
b. Qualified indorser and person negotiating by mere delivery
c. Drawee
d. Party accommodated by Acceptor or Maker

162. It is a bill which is, or on its face, purports to be both drawn and payable in the Philippines.
a. Foreign bill
b. Inland bill
c. National bill
d. Alien bill

163. The following are considered foreign bills and not inland bill, except
a. The bill on its face purports to be drawn in the Philippines but payable outside the Philippines.
b. The bill on its face purports to be drawn outside the Philippines but payable in the Philippines.
c. The bill purports to be both drawn and payable in the Philippines.

164. It is the formal declaration drawn up and signed by a notary that he presented a foreign bill of exchange for
acceptance or for payment and that it was refused. It is required for a foreign bill but not for inland bill.
a. Notice of dishonor
b. Protest
c. Petition
d. Complaint

165. The following are the instances when a protest of negotiable bill of exchange is mandatory, except
a. When a foreign bill is dishonored by non-acceptance or a foreign bill previously accepted is dishonored by
nonpayment.
b. Where an inland bill has been accepted for honor.
c. Where an inland bill contains a referee in case of need.
d. Where an inland bill is dishonored by the acceptor for honor
e. Where an inland bill is dishonored by non-acceptance by the drawee or non-payment by the acceptor
166. The protest must be annexed to the bill or must contain a copy thereof, and must be under the hand and seal of the
notary making it and must specify the following, except
a. The time and place of presentment
b. The fact that presentment was made and the manner thereof.
c. The cause or reason for protesting the bill
d. The demand made and the answer given, if any, or the fact that the drawee or acceptor could not be found.
e. The law and jurisprudence supporting the allegations.

167. Under Act No. 2031, protest must be made by

a. Notary public
b. By any respectable resident of the place where the bill is dishonoured.
c. Either A or B.
d. Neither A nor B.

168. The protest should be made in the presence of

a. One or more credible witnesses
b. Two or more credible witnesses
c. Three or more credible witnesses
d. Four or more credible witnesses

169. As a general rule, where shall protest be made?

a. At the place where the bill is written.
b. At the place where the payee is residing.
c. At the place where the bill is dishonoured.
d. At the place where the holder is residing.

170. When a foreign bill is drawn payable at the place of business or residence of some person other than the drawee
and it is dishonored by nonacceptance where shall protest for non-payment be made?
a. Residence of the drawee
b. Residence of the payee.
c. Residence of the holder.
d. At the place where it is expressed to be payable.

171. The following statements concerning protest of a foreign bill are correct, except
a. A bill which has been protested for non-acceptance may be subsequently protested for non-payment.
b. Where the acceptor has been adjudged a bankrupt or an insolvent or has made an assignment for the benefit
of creditors before the bill matures, the holder may cause the bill to be protested for better security against
the drawer and indorsers.
c. Protest is dispensed with by any circumstances which would dispense with notice of dishonor. Delay in
noting or protesting is excused when delay is caused by circumstances beyond the control of the holder and
not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, the bill
must be noted or protested with reasonable diligence.
d. When a bill is lost or destroyed or is wrongly detained from the person entitled to hold it, protest is not
allowed to be made on a copy or written particulars thereof.

172. Where a bill is drawn in a set, each part of the set being numbered and containing a reference to the other parts,
what is the presumption of the law?
a. The whole of the parts constitutes one bill.
b. Each part is considered a separate bill.
c. The other parts are bills while the other parts are promissory notes.
d. The whole of the parts constitutes one promissory note.

173. Where two or more parts of bills in set are negotiated to different holders in due course, who shall be treated as
the true owner of the bills in set?
a. The holder whose title first accrues.
b. The holder whose part has a larger value.
c. The holder whose part has a smaller value.
d. The holder whose who has first registered the part in good faith.

174. Where No or more parts of bills in set are negotiated to different holders in due course, will the payment or
acceptance of the parts by drawee-acceptor first presented by the untrue owner of the bills in set prejudice the
drawee-acceptor?
a. No because he is presumed by law to be in good faith.
b. Yes because he is presumed by law to be in good faith,
c. Yes because he must pay only the true owner.
d. Yes because he has the duty to inquire about the other parts.
175. The following statements concerning bills in set are correct, except
a. Where the holder of a set indorses two or more parts to different persons he is liable on every such part,
and every indorser subsequent to him is liable on the part he has himself indorsed, as if such parts were
separate bills.
b. The acceptance may be written on any part and it must be written on one part only.
c. If the drawee accepts more than one part and such accepted parts negotiated to different holders in due
course, he is liable on every such part as if it were a separate bill.
d. When the acceptor of a bill drawn in a set pays it without requiring the part bearing his acceptance to be
delivered up to him, and the part at maturity is outstanding in the hands of a holder in due course, he is
liable to the holder thereon.
e. Except as herein otherwise provided, where any one part of a bill drawn in a set is discharged by payment
or otherwise, that one part of the bills in set is discharged and not the whole instrument.

176. The following statements pertaining to check are true, except

a. A check of itself does not operate as an assignment of the funds of the drawer in the hands of the bank
and the bank is not liable until he accepts or certifies the check.
b. A check must be presented for payment within a reasonable time (6 months) after its issue otherwise the
drawer will be discharged from liability thereon to the extent of loss caused by the delay.
c. A check not presented within a reasonable time (6 months) after issue is stale check.
d. A check is not payable on demand if not stated on its face.
177. The following are the effects of a certification of check by the bank on which it is drawn, except
a. It is equivalent to acceptance.
b. If procured by the holder, the drawer and all general indorsers are discharged.
c. It operates as an assignment of the funds of the drawer in the hands of the drawee bank.
d. The check is considered dishonored.
178. The following are the purposes of crossing of check, except
a. To have the check deposited only to the account of the payee.
b. To have the check paid only with the intervention of a particular banker when its name is placed between
the parallel lines crossing the check
c. To obtain assurance that the check will be paid only to the rightful person.
d. To have the check be encashed.
179. The following statements pertain to kinds of checks. Which of the following pertains to stale check?
a. It is a check which, across its face, is written the word memorandum or memo and it is regarded as a
contract whereby the drawer engages to pay the bona fide holder absolutely and not upon a condition to
pay upon presentment and non-payment.
b. it is a check drawn by the cashier of a bank in the name of the bank and against the bank itself payable to
a third person or order.
c. It is a check drawn by the manager of a bank in the name of the bank and against the bank itself payable
to a third person.
d. It is a check used by traveler to supply him with funds in lieu of cash.
e. It is a check which bears the word certified on its face signifying that the check is recognized and accepted
by the bank as a valid appropriation of the amount specified thereon.
f. It is a check which bears two parallel lines usually drawn diagonally on the upper left portion of its face.
g. It is a check not presented for payment within reasonable time from its issue or within 6 months from its
maturity date.
h. It is a check wherein the date stated in the check is later than the actual date of issuance of check.
i. It is a check wherein the date stated in the check is earlier than the actual date of issuance of check.

180. M issued a negotiable promissory note payable to order of P, a minor, in the amount of P1M. P generally indorsed
and delivered it to A who subsequently and generally indorsed and delivered it to H. Which is correct?
a. In case M dishonors the note, H can collect from P because minority is a real defense.
b. H is not a holder because P, a minor, cannot validly transfer title of a negotiable instrument.
c. H cannot collect from M because the latter can set up the real defense of minority.
d. H may go after M or A because they violated their warranties that P is a capacitated person.
181. M issued a negotiable promissory note payable to order of P. P subsequently indorsed and delivered it to A. A
left the note in his car. B stole the note and forged A's signature to indorse it to himself. Afterwards, B indorsed
and delivered it to C who subsequently indorsed and delivered it to H, a holder in due course. From whom may
H collect the amount due?
a. From M, P, A, B orc
b. From M, P or A
c. From B orc
d. From A, B or C

182. M issued a negotiable promissory note payable to P or bearer. P subsequently indorsed and delivered it to A. A
left the note in his car. B stole the note and forged A's signature to indorse it to himself. Afterwards, B indorsed
and delivered it to C who subsequently indorsed and delivered it to H, a holder in due course. May H collect from
M?
a. No because forgery is a real defense.
b. Yes because want of delivery is only a personal defense.
c. No because B stole the note.
d. Yes but only if notice of dishonor will be given to M.
183. M, a minor, issued a negotiable promissory note payable to bearer and delivered it to P. P delivered it to A who
delivered it to B. Afterwards B delivered it to C who subsequently delivered it to H, a holder in due course. From
whom may H collect the amount due?
a. M, P, A, B or C
b. P, A, B orc
c. A, B orc
d. C only
184. M issued a negotiable promissory note payable to bearer and delivered it to P. P delivered it to A who delivered
it to B. Afterwards B delivered it to C who subsequently delivered it to H, a holder in due course. From whom
may H collect the amount due if M becomes insolvent?
a. P, A, B orc
b. P, A, or C
c. A or B
d. C only
e. None of the above
185. M issued a negotiable promissory note payable to order of P. P subsequently indorsed and delivered it to A. A
qualifiedly indorsed and delivered it to B. B indorsed and delivered it to C who subsequently indorsed and
delivered it to H, a holder in due course. If M becomes insolvent, from whom may H collect the amount due if
the proper notice is given?
a. P, A, B orc
b. P, B orc
c. B or C
d. C only
186. M issued a negotiable promissory note payable to order of P. P subsequently indorsed and delivered it to Z. Z lea
the note in his car. X stole the note and forged Z's signature to indorse it to himself. X subsequently indorsed and
delivered it to A. A qualifiedly indorsed and delivered it to B. B indorsed and delivered it to C who subsequently
indorsed and delivered it to H, a holder in due course. Which is correct?
a. H can go after M.
b. H can go after A because he violates his warranty.
c. H cannot go after B if M will not pay the instrument.
d. H cannot go after X.
187. M issued a negotiable promissory note payable to order of P in exchange for shabu. P subsequently indorsed and
delivered it to A. A subsequently indorsed and delivered it to B. Afterwards, B indorsed and delivered it to C, a
holder not in due course, who subsequently indorsed and delivered it to H, a holder in due course. May H collect
from M?
a. No because illegality of consideration is a real defense.
b. No because void contract cannot produce any effect whatsoever.
c. Yes because illegality of consideration is a personal defense.
d. Yes but only if notice of dishonor is given to him.
188. M issued a negotiable promissory note payable to order of P in exchange for shabu. P subsequently indorsed and
delivered it to A. A subsequently indorsed and delivered it to B. Afterwards, B indorsed and delivered it to C, a
holder not in due course, who subsequently indorsed and delivered it to H, a holder not in due course. From whom
may H collect the amount due?
a. P, A, B orc
b. P, A, B orc
c. A, B orc
d. C only
189. D placed his checkbook in his locked cabinet. D'S kasambahay stole the said booklet and issued a check payable
to her order by forging D'S signature. Afterwards, the kasambahay indorsed and delivered the check to A who
subsequently indorsed the check to H, a holder in due course, H went to drawee-bank and was able to encash the
check. The drawee-bank debited the amount to D'S account. May D recover the amount from drawee-bank?
a. No if the drawee-bank acted in good faith.
b. No because the drawer is guilty of negligence.
c. Yes because the drawee-bank violates its warranty.
d. Yes but only if the drawee-bank is guilty of gross negligence.

Distinctions between Negotiable Check and Negotiable Bili of Exchange

Negotiable Check Negotiable Bill of Exchange
Always drawn against a bank or banker May or may not be drawn against a bank or banker
Generally payable on demand except post-dated check May be payable on demand or at fixed time or at a determinable future
time
Presentment for acceptance is not required Presentment for acceptance is required
Drawer must have funds in the hands of the drawee to avoid criminal Drawer need not have funds with the drawee
prosecution for violation of BP 22
If payable on demand, must be presented for payment within a If payable on demand, must be presented for payment within a
reasonable time 6 months after issue reasonable time after the last negotiation
Death of the drawer of the check revokes the bank's authority to a Death of the drawer of ordinary bill of exchange does not revoke the
drawee's authority to pay.
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