Law on Negotiable Instruments

Answer No. Statement

A 1 An instrument to be negotiable must conform to the
following requirements except:
A. IT MUST BE IN WRITING AND SIGNED BY THE MAKER OR DRAWEE
B. MUST CONTAIN AN UNCONDITIONAL PROMISE OR ORDER TO PAY A
CERTAIN SUM IN MONEY
C. MUST BE PAYABLE TO ORDER OR TO BEARER
D. MUST BE PAYABLE ON DEMAND OR AT A FIXED OR DETERMINABLE
FUTURE TIME
D 2 The sum payable is to be paid with the following except:
A.BY STATED INSTALLMENTS
B.WITH INTEREST
C.WITH EXCHANGE, WHETHER AT A FIXED RATE OR CURRENT RATE
D.WITH COSTS OF COLLECTION OR ATTORNEY’S FEE IN CASE
PAYMENT SHALL BE MADE AT MATURITY
C 3 Which of the following is incorrect?
A. AN ORDER OF PROMISE TO PAY IS COUPLED WITH AN
INDICATION OF A PARTICULAR FUND OUT OF WHICH REIMBURSEMENT
IS TO BE MADE.
B. AN ORDER OR PROMISE TO PAY IS COUPLED WITH A STATEMENT
OF TRANSACTION
C. AN ORDER OR PROMISE TO PAY OUT OF A PARTICULAR FUND IS
UNCONDITIONAL
D. AN UNQUALIFIED ORDER OR PROMISE TO PAY IS UNCONDITIONAL
B 4 A determinate future time is expressed to be payable:
A. AT A FIXED PERIOD BEFORE DATE OR SIGHT
B. ON A FIXED DETERMINABLE FUTURE TIME
C. AT A FIXED PERIOD AFTER THE OCCURRENCE OF A SPECIFIED
EVENT, WHICH IS CERTAIN TO HAPPEN, AND THE TIME OF
HAPPENING IS CERTAIN
D. ON OR BEFORE DATE OR SIGHT
B 5 Which of the following provisions will not affect the
negotiability of an instrument?
A. AUTHORIZATION OF SALE OF COLLATERAL SECURITIES IN CASE
THE INSTRUMENT IS TO BE PAID AT MATURITY
B. THE GIVING OF THE HOLDER AN ELECTION TO REQUIRE
SOMETHING TO BE DONE IN LIEU OF PAYMENT OF MONEY
C. PROVISION TO WAIVE THE BENEFIT OF ANY LAW UNINTENDED
FOR THE ADVANTAGE OF THE OBLIGOR
D. AUTHORIZATION OF A CONFESSION OF JUDGEMENT IF THE
INSTRUMENT IS PAID AT MATURITY
B 6 A negotiable instrument is discharged through the
following except:
A.BY PAYMENT IN DUE COURSE BY OR ON BEHALF OF THE
PRINCIPAL DEBTOR
B.WHEN THE PRINCIPAL DEBTOR BECOMES THE HOLDER OF IT
BEFORE MATURITY
C.BY THE INTENTIONAL CANCELLATION BY THE HOLDER
 D.BY AN ACT WHICH WILL DISCHARGE A SIMPLE CONTRACT FOR
PAYMENT OF MONEY
A 7 A person secondarily liable on the instrument is
discharged through the following except:
A. BY A RELEASE OF THE PRINCIPAL DEBTOR UNLESS THE
HOLDER’S RIGHT OF RECOURSE AGAINST THE PARTY SECONDARILY
LIABLE IS EXPRESSLY RESERVED
B. BY A DISCHARGE OF A PRIOR PARTY
C. BY A VALID TENDER OR PAYMENT MADE BY A PRIOR PARTY
D. BY ANY ACT WHICH DISCHARGES THE INSTRUMENT
B 8 When can a holder expressly renounce his rights against
any party to the instrument?
A. AFTER DATE OR SIGHT
B. AFTER MATURITY
C. AT A FIXED PERIOD
D. ON OR BEFORE THE OCCURRENCE OF A SPECIFIED EVENT
D 9 It is an unconditional order in writing addressed by one
person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on
demand, or at fixed or determinable future time, a sum
certain in money, to order or to bearer.
A. PROMISSORY NOTE
B. BILL OF LADING
C. CERTIFICATE OF DEPOSIT
D. BILL OF EXCHANGE
B 10 Which of the following changes in the instrument is not a
material alteration?
A. RELATIONS OF THE PARTIES
B. PLACE OF PAYMENT WHERE PLACE OF PAYMENT IS SPECIFIED
C. TIME OF PAYMENT
D. CURRENCY IN WHICH PAYMENT IS TO BE MADE
A 11 Which of the following conditions constitutes a holder in
due course?
A. THAT HE BECAME THE HOLDER OF IT BEFORE IT WAS OVERDUE
AND WITHOUT NOTICE THAT IT HAS BEEN PREVIOUSLY
DISHONOURED
B. THAT HE TOOK IT IN GOOD FAITH AND NOT FOR VALUE
C. THAT ALL PRIOR PARTIES HAD CAPACITY TO CONTRACT
D. THAT THE INSTRUMENT IS GENUINE AND IN ALL RESPECTS WHAT
IT PURPORTS TO BE
B 12 Which of the following is incorrect regarding the
renunciation of or by the holder of his rights?
A. A RENUNCIATION DOES NOT AFFECT THE RIGHTS OF A HOLDER
IN DUE COURSE WITHOUT NOTICE
B. A RENUNCIATION MUST BE IN WRITING UNLESS THE INSTRUMENT
IS DELIVERED UP TO THE SECONDARILY LIABLE PERSON
C. A RENUNCIATION MAY BE DONE BEFORE, AT, OR AFTER THE
MATURITY OF THE INSTRUMENT
D. A RENUNCIATION MADE AT OR AFTER MATURITY DISCHARGES THE
INSTRUMENT
A 13 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.
A. PROMISSORY NOTE
B. BILL OF LADING
C. CERTIFICATE OF DEPOSIT
D. BILL OF EXCHANGE
D 14 It is an indorsement which constitutes the indorser a mere
assignor of the title to the instrument.
A. RESTRICTIVE
B. BLANK
C. CONDITIONAL
D. QUALIFIED
A 15 The title of a person who negotiates an instrument is
defective if he obtained the instrument or signature by
the following except:
A. NEGLIGENCE
B. UNLAWFUL MEANS
C. FRAUD
D. DURESS
C 16 Which of the following is not a liability of a maker?
A. ENGAGES THAT HE WILL PAY THE INSTRUMENT ACCORDING TO
ITS TENOR
B. ADMITS THE EXISTENCE OF THE PAYEE
C. ENGAGES THAT THE INSTRUMENT WILL BE ACCEPTED OR PAID OR
BOTH, ACCORDING TO ITS TENOR
D. ADMITS HIS CAPACITY TO INDORSE
C 17 Which of the following should a person negotiating an
instrument by delivery or qualified indorsement warrant?
A. THAT THE INSTRUMENT IS COMPLETE AND REGULAR UPON ITS
FACE
B. THAT HE TOOK IT IN GOOD FAITH AND FOR VALUE
C. THAT ALL PRIOR PARTIES HAD CAPACITY TO CONTRACT
D. THAT HE HAD NO NOTICE OF ANY INFIRMITY IN THE
INSTRUMENT
B 18 To whom shall the presentment for payment be made when the
principal debtor is dead and no place of payment is
specified?
A. TO HIS USUAL PLACE OF BUSINESS OR RESIDENCE
B. TO HIS PERSONAL REPRESENTATIVE
C. TO THE HOLDER IN THE OFFICE FOR THE TIME BEING
D. TO THE PERSON FOUND AT THE PLACE OF PRESENTMENT
D 19 Which of the following is incorrect regarding notice of
dishonor?
A. A NOTICE MAY BE IN WRITING OR MERELY ORAL
B. AN INSUFFICIENT WRITTEN NOTICE MAY BE SUPPLEMENTED AND
VALIDATED BY VERBAL COMMUNICATION
C. A NOTICE MAY BE GIVEN BY OR ON BEHALF OF THE HOLDER
D. A MISDESCRIPTION OF THE INSTRUMENT VITIATES THE NOTICE.
A 20 It is bill of exchange drawn on a bank payable on demand.
A. CHECK
 B. CURRENT SAVINGS
C. BANK OVERDRAFT
D. TIME DEPOSIT
C 21 The validity and negotiable character of an indorsement
are not affected with the following facts, except:
A. IT IS NOT DATED
B. DOES NOT SPECIFY THE VALUE GIVEN
C. DOES NOT SPECIFY A PARTICULAR KIND OF CURRENT MONEY
WHERE PAYMENT IS TO BE MADE
D. BEARS A SEAL
B 22 It is when an instrument contains a date later than the
true date of its issuance.
A. PRE-DATED
B. POST-DATED
C. ANTE-DATED
D. UNDATED
C 23 It is an indorsement that does not prohibit the further
negotiation of the instrument, regardless, of whether the
condition has been fulfilled or not.
A. SPECIAL
B. BLANK
C. CONDITIONAL
D. RESTRICTIVE
A 24 Which of the following constitutes notice of defect?
A. THE PERSON TO WHOM THE INSTRUMENT WAS NEGOTIATED HAD
ACTUAL KNOWLEDGE OF INFIRMITY OR DEFECT
B. THE PERSON TO WHOM THE INSTRUMENT WAS NEGOTIATED HAD
KNOWLEDGE THAT HE TOOK IT IN GOOD FAITH
C. THAT HE HAD NO NOTICE OF ANY ACT WHICH WILL IMPAIR THE
VALIDITY OF THE INSTRUMENT
D. THAT IT IS MADE BY A NOTARY PUBLIC
A 25 What constitutes sufficient presentment?
A. IT IS MADE AT A REASONABLE HOUR ON A BUSINESS DAY
B. IT IS MADE BY THE PERSON PRIMARILY LIABLE
C. IT IS MADE TO THE HOLDER OR TO THE INDORSEE
D. IF THE HOLDER IS ABSENT OR INACCESSIBLE, TO ANY PERSON
FOUND AT THE OFFICE FOR THE TIME BEING
D 26 He is one who has signed the instrument as maker, drawer,
acceptor or indorser without receiving value, lending his
name to some other person.
A. ASSIGNOR
B. TRANSFEREE
C. REFEREE IN CASE OF NEED
D. ACCOMMODATION PARTY
D 27 Which of the following is incorrect regarding the
negotiation of an instrument?
A. IF AN INSTRUMENT IS PAYABLE TO BEARER, IT NEGOTIATED BY
DELIVERY
B. IF AN INSTRUMENT IS PAYABLE TO ORDER, IT IS NEGOTIATED
BY INDORSEMENT AND COMPLETED BY DELIVERY
C. AN INDORSEMENT MUST BE WRITTEN ON THE INSTRUMENT ITSELF
 D. THE SIGNATURE OF THE INDORSEE CONSTITUTES SUFFICIENT
INDORSEMENT
A 28 It is an indorsement which specifies the person to whom or
to whose order the instrument is payable.
A. SPECIAL
B. BLANK
C. CONDITIONAL
D. RESTRICTIVE
C 29 What includes counterclaim or setoff?
A. ACCEPTANCE
B. DELIVERY
C. ACTION
D. INDORSEMENT
C 30 Who can make a protest?
A. BY THE HOLDER OR A PERSON ON HIS BEHALF
B. BY A RESPECTED RESIDENT IN THE PLACE OF PRESENTMENT
WITH TWO OR MORE WITNESSES
C. BY A NOTARY PUBLIC
D. BY THE PRINCIPAL DEBTOR, IF ABSENT OR INACCESSIBLE, TO
HIS PERSONAL REPRESENTATIVE
B 31 When should presentment for acceptance be made?
A. WHERE THE BILL EXPRESSLY STIPULATES THAT IT SHALL BE
PRESENTED FOR ACCEPTANCE
B. WHERE THE BILL IS PAYABLE ON OR BEFORE SIGHT OF
PRESENTMENT FOR ACCEPTANCE
C. WHERE PRESENTMENT FOR ACCEPTANCE IS NECESSARY IN ORDER
TO FIX THE MATURITY OF THE INSTRUMENT
D. WHERE THE BILL IS DRAWN PAYABLE ELSEWHERE THAT AT THE
RESIDENCE OR PLACE OF BUSINESS OF THE DRAWEE
C 32 What qualified acceptance says that acceptance is to pay
only at a particular place?
A. CONDITIONAL
B. SPECIFIED
C. LOCAL
D. GENERAL
A 33 An instrument may be drawn payable to the order of the
following except:
A. ONE OR MORE PAYEES JOINTLY
B. THE DRAWER OR MAKER
C. DRAWEE
D. ONE OR SOME OF SEVERAL PAYEES
D 34 Which of the following is a liability of an irregular
indorser?
A. IF HE SIGNS FOR THE ACCOMMODATION OF THE PAYEE, HE IS
LIABLE TO ALL PARTIES SUBSEQUENT TO THE PAYEE
B. IF THE INSTRUMENT IS PAYABLE TO THE ORDER OF THE MAKER
OR DRAWER, HE IS LIABLE TO ALL PARTIES SUBSEQUENT TO
THE MAKER OR DRAWER
C. IF THE INSTRUMENT IS PAYABLE TO THE ORDER OF A THIRD
PERSON, HE IS LIABLE TO THE PAYEE AND TO ALL SUBSEQUENT
PARTIES
 D. IF THE INSTRUMENT IS PAYABLE TO BEARER, HE IS LIABLE TO
THE PAYEE AND TO ALL PARTIES SUBSEQUENT PARTIES TO THE
PAYEE
A 35 When is presentment for payment excused?
A. BY WAIVER OF PRESENTMENT, EXPRESS OR IMPLIED
B. WHERE THE DRAWER IS A FICTITIOUS PERSON
C. WHERE THE NAME OF THE DRAWEE DOES NOT PURPORT TO BE THE
NAME OF THE ANY PERSON
D. WHERE AFTER THE EXERCISE OF REASONABLE DILIGENCE,
PRESENTMENT CAN BE MADE
C 36 The following are cases where notice of dishonor is not
required to be given to the drawer except:
A. WHERE THE DRAWER AND DRAWEE ARE THE SAME PERSON
B. WHEN THE DRAWEE IS FICTITIOUS PERSON
C. WHERE THE DRAWER HAS A RIGHT TO EXPECT OR REQUIRE THAT
THE DRAWEE OR ACCEPTOR WILL HONOR THE INSTRUMENT
D. WHERE THE DRAWER HAS COUNTERMANDED PAYMENT
B 37 When is a protest required to be made?
A. WHEN A NEGOTIABLE INSTRUMENT HAS BEEN DISHONORED
B. IN THE CASE OF FOREIGN EXCHANGE BILLS
C. AFTER DISCHARGE OF AN INSTRUMENT
D. IT IS REQUIRED FOLLOWING THE NON-ACCEPTANCE OF A
PRESENTMENT FOR PAYMENT
C 38 Which of the following is correct regarding notice of
dishonor?
A. A NOTICE GIVEN BY OR ON BEHALF OF A PARTY ENTITLED TO
GIVEN, INURES THE BENEFIT OF THE HOLDER AND ALL PRIOR
PARTIES
B. WHEN PARTIES TO BE NOTIFIED ARE PARTNERS, NOTICE TO ANY
PARTNER IS NOT A NOTICE TO THE FIRM IN CASE OF
DISSOLUTION
C. A NOTICE MAY BE GIVEN BY AN AGENT IN HIS OWN NAME OR IN
THE NAME OF THE PARTY ENTITLED TO GIVEN NOTICE
D. A NOTICE TO JOINT PERSONS WHO ARE NOT PARTNERS MUST BE
GIVEN TO EACH OF THEM EVEN WHEN ONE HAS THE AUTHORITY
TO RECEIVE FOR THE OTHERS
D 39 How are two or more persons who signed an instrument
liable?
A. THEY ARE LIABLE SOLIDARILY
B. JOINTLY WHETHER THEY ARE PARTNERS OR NOT
C. EACH IS LIABLE TO THE EXTENT OF THEIR AGREEMENT
D. THEY ARE JOINTLY AND SEVERALLY LIABLE
B 40 He is a holder who took an instrument for value and in
good faith.
A. HOLDER FOR VALUE
B. HOLDER IN DUE COURSE
C. HOLDER NOT IN DUE COURSE
D. HOLDER IN GOOD FAITH
D 41 He is a party who is knowledgeable of the defect or any
infirmity in the instrument.
A. REMOTE PARTY
 B. HOLDER IN BAD FAITH
C. HOLDER NOT IN DUE COURSE
D. IMMEDIATE PARTY
B 42 How can a blank indorsement be converted into a special
indorsement?
A. BY INDORSING IT FURTHER TO OTHER PARTIES AND COMPLETE
IT THROUGH DELIVERY
B. BY WRITING OVER THE SIGNATURE OF THE INDORSER IN BLANK
CONSISTENT WITH THE NEGOTIABLE CHARACTER
C. BY PLACING THE NAME OF THE PERSON TO WHOM IT IS PAYABLE
WITH A SIGNATURE BY OR ON BEHALF OF THE PERSON ENTITLED
TO RECEIVE PAYMENT
D. THROUGH DELIVERY OF THE INDORSER TO FURTHER THE
NEGOTIATION OF THE INDORSEMENT
A 43 He is one who places his signature upon an instrument
other than as maker, drawer, or acceptor.
A. INDORSER
B. HOLDER
C. ACCOMMODATION PARTY
D. DRAWEE
D 44 An acceptance to pay at a particular place unless it
expressly states that the bill is to be paid there only
and not elsewhere.
A. CONDITIONAL
B. QUALIFIED
C. LOCAL
D. GENERAL
B 45 Which of the following is not a right of a party as to
qualified acceptance?
A. FOR A HOLDER, HE MAY REFUSE TO TAKE A QUALIFIED
ACCEPTANCE
B. FOR AN INDORSEE, HE MAY TREAT THE BILL AS DISHONORED BY
NON-ACCEPTANCE IF HE DOES NOT OBTAIN AN UNQUALIFIED
ACCEPTANCE
C. FOR A DRAWER AND INDORSER, WHEN A QUALIFIED ACCEPTANCE
IS TAKEN, THEY ARE DISCHARGE FROM THE THEIR LIABILITY
ON THE BILL
D. WHEN A DRAWER RECEIVES NOTICE OF A QUALIFIED
ACCEPTANCE, HE MUST EXPRESS HIS DISSENT TO THE HOLDER
OR HE WILL BE DEEMED TO HAVE ASSENTED THERETO, WITHIN A
REASONABLE TIME
C 46 Which of the following is not a rule in the case of an
ambiguous instrument?
A. 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
B. WHERE THE INSTRUMENT IS NOT DATED, IT WILL BE
CONSIDERED TO BE DATE AS OF THE TIME IT WAS ISSUED
C. WHERE AN INSTRUMENT CONTAINING THE WORD “I PROMISE TO
PAY” IS SIGNED BY TWO OR MORE PERSONS, THEY ARE DEEMED
TO BE JOINTLY LIABLE
 D. WHERE THE SUM PAYABLE IS EXPRESSED IN WORDS AND IN
FIGURES, ANY DISCREPANCY BETWEEN THE TWO, THE SUM
DENOTED IN WORDS PREVAILS
D 47 Which of the following is not a kind of an indorsement?
A. SPECIAL
B. CONDITIONAL
C. QUALIFIED
D. GENERAL
C 48 It includes a body of persons whether incorporated or not.
A. BEARER
B. BANK
C. PERSON
D. CASHIER
C 49 The Negotiable Instruments Law is Act no.
A.1023
B.2013
C.2031
D.1987
C 50 An instrument is payable to bearer when:
A. WHEN THE ONLY AND LAST INDORSEMENT IS A SPECIAL
INDORSEMENT
B. WHEN IT IS PAYABLE TO THE ORDER OF A FICTITIOUS OR NON-
EXISTING PERSON AND SUCH FACT WAS UNKNOWN BY THE PERSON
MAKING IT SO PAYABLE
C. WHEN IT IS EXPRESSED TO BE SO PAYABLE
D. IT IS DRAWN PAYABLE TO THE ORDER OF A DRAWEE