Deck 24: Form and Content

Question 1

5)Negotiability invests negotiable instruments with a high degree of marketability and commercial utility by allowing them to be freely transferable and enforceable by a person with the rights of a holder in due course against a person obligated on the instrument.

Answer 1

True

Question 2

20)An incomplete instrument is not negotiable. However, when it is completed, it may become negotiable.

Answer 2

True

Question 3

19)An instrument payable at a definite time is time paper.

Answer 3

True

Question 4

1)Revised Article 1 of the UCC states that the "money" requirement for a negotiable instrument means the current official currency of the government, not just a medium of exchange authorized or adopted by a sovereign government as part of its currency.

Question 5

16)The Revised Article 3 of the UCC provides that a check which meets all requirements of being a negotiable instrument, except that it is not payable to bearer or order, is nevertheless a negotiable instrument.

Question 6

11)Only a bank may serve as the maker of a certificate of a deposit.

Question 7

4)A draft involves three parties: a drawer, a drawee, and a payee.

Question 8

3)A signed promissory note stating "I promise to pay to Bonnie Ramcell $600 on December 15, 2014" is not covered by Article 3 of the UCC.

Question 9

13)To be negotiable, an instrument must be in writing.

Question 10

6)A promissory note is an instrument that involves three parties in three capacities.

Question 11

12)Jake signed and delivered a negotiable promissory note payable to Nancy. Nancy negotiated the note to Fred. Fred now has the same legal status as an assignee of a contract.

Question 12

7)A check is a draft payable on demand.

Question 13

2)Notes and certificates of deposit are orders to pay money.

Question 14

14)A reference in a negotiable instrument to the existence of a separate agreement to which it is subject destroys the negotiability of the instrument.

Question 15

9)Handwritten words supersede typewritten words contained in negotiable instruments.

Question 16

10)The vital importance of negotiable instruments and electronic transfers as methods of payment cannot be overstated.

Question 17

18)Negotiability is wholly a matter of form.

Question 18

17)A maker must sign in the lower right-hand corner of the instrument.

Question 19

15)An assignee of contractual rights acquires only the same rights as the assignor.

Question 20

8)Paper payable "on demand" fails the test of negotiability in that it does not contain a specific time.

Question 21

40)In the development of the law of negotiable instruments, which of the following was not a step?

A) Centuries ago, contract rights to the payment of money were not assignable because the contractual promise ran to the promisee.
B) Contractual rights became assignable to third parties.
C) The law of assignments changed to permit assignees to obtain greater rights than their assignors.
D) The concept of a holder in due course developed, which allowed certain good faith transferees who gave value to acquire the right to be paid, free of most of the defenses to which an assignee would be subject.

Question 22

33)A certificate of deposit differs from a promissory note in that:

A) the maker is always a bank.
B) there are three parties to the transaction.
C) the payee of a CD must be paid on demand.
D) Both the maker is always a bank  and the payee of a CD must be paid on demand .

Question 23

30)An authorization to confess judgment on the instrument destroys its negotiability.

Question 24

23)An "X" or a thumbprint could constitute a signature within the meaning of the term in the Code.

Question 25

24)An "I.O.U." is a negotiable instrument.

Question 26

27)A provision in a promissory note payable one year from its date that the maker may extend the maturity date six months impairs the note's negotiability.

Question 27

37)A __________ is a specialized form of promise to pay money given by a maker in which the bank is the maker.

A) note
B) certificate of deposit
C) trade acceptance
D) cashier's check

Question 28

36)Carol buys some items at the drugstore and writes a check to the store on her account at First Bank. Who is the drawee?

A) Carol.
B) The drugstore.
C) First Bank.
D) There is none.

Question 29

26)A cashier's check is a check drawn by a bank upon itself to the order of a named payee.

Question 30

21)Revised Article 3 eliminates the particular fund doctrine by providing that a promise or order is not made conditional because payment is to be made only out of a particular fund.

Question 31

39)Bill goes to First Bank to get a loan. He signs a note and agrees to repay the bank. What is the legal term for Bill's status regarding the note?

A) Payee.
B) Maker.
C) Payor.
D) Drawer.

Question 32

34)To be negotiable, the instrument must satisfy all except which one of the following requirements?

A) It must contain a promise or order to pay.
B) It must be for a certain amount.
C) It must be payable on demand.
D) It must be signed.

Question 33

35)To have the full benefit of negotiability, negotiable instruments must:

A) meet the requirements of negotiability.
B) meet the requirements of negotiability and be acquired by a party who notified the maker or drawer of the transfer.
C) be acquired by a holder in due course.
D) Both meet the requirements of negotiability  and also  be acquired by a holder in due course.

Question 34

38)Under the Check 21 Act:

A) banks must accept checks in electronic form.
B) banks are permitted to truncate original checks and process check information electronically.
C) banks must create substitute checks which are the legal equivalent of the original checks.
D) All of these.

Question 35

32)Which of the following is not a negotiable instrument?

A) A check.
B) A draft.
C) A certificate of deposit.
D) A stock certificate.

Question 36

25)Postdating an instrument will destroy its negotiability.

Question 37

29)The drawee is the individual who signs a check and promises to pay.

Question 38

28)The person who signs a note and promises to pay it is the maker.

Question 39

31)If Sam writes a check drawn on his account at First Bank to State University to pay his tuition:

A) Sam is the drawer.
B) the university is the drawee.
C) the bank is the payee.
D) Sam is the maker.

Question 40

22)Jones signed a 90-day note promising to pay $1,000 plus interest. The note states that interest is to be based on a variable, published rate external to the note. The sum the borrower must repay is uncertain, so the note is not negotiable under Revised Article 3.

Question 41

51)Bill's car broke down on a dark, rainy night. Along came Andy in his service station's four-wheel drive truck with tools and supplies in the back. Bill didn't have any credit cards and only $3.25 cash, so Andy told him to write a check or an IOU. Neither Andy nor Bill had any paper, so Bill wrote on the cover of Andy's lunchbox: "If my car is fixed right by Andy Walcott, I will pay him $150. (Signed) Bill Boyd." Andy indorses the note and takes it to a commercial factor for negotiation. The factor refuses, saying it is non-negotiable because it:

A) is written on a lunchbox.
B) is conditional on satisfactory repair of the car.
C) mentions the existence of a contract to repair the car.
D) All of these.
E) None of these.

Question 42

42)Which of the following would be a bearer instrument?

A) A check payable to "cash."
B) A check that says "pay to the order of John Jones."
C) A check that says "pay to the order of bearer."
D) A check payable to "cash" or a   check that says "pay to the order of bearer."

Question 43

44)Which of the following will destroy negotiability?

A) Making the instrument subject to the terms of another agreement.
B) Making the instrument payable in Japanese yen.
C) Signing a check in pencil.
D) Signing a check with an "X."

Question 44

41)X signs a negotiable instrument ordering Y to pay Z the sum of $500. Y is the:

A) maker.
B) drawee.
C) payee.
D) drawer.

Question 45

54)Elmore purchases goods from Grady, and Elmore executes and delivers a negotiable note to Grady for $1,200, payable to Grady's order in 30 days. Two weeks later, Grady negotiates the note to McDaniel. Which of the following is true?

A) McDaniel is required to notify Elmore that he acquired the note.
B) If the goods are defective, Elmore's defense will necessarily be available against McDaniel.
C) Whether Elmore's defense is available against McDaniel will depend on whether McDaniel acquired the note in good faith and for value, had no knowledge of the defense, and took the note without reason to question its authenticity.
D) McDaniel can acquire no greater rights than Grady had in the note.

Question 46

58)The court in Cooperative Centrale Raiffeisen-Boerenleenbank B.A. v. Bailey found:

A) whether an instrument is negotiable is a question of fact.
B) whether an instrument is negotiable is to be determined without reference to the intent of the parties.
C) the wording of the note was unclear and therefore it did not fall within the UCC Article 3 requirements of negotiability.
D) the question of whether the promissory note was negotiable had to be determined by questioning the parties to the transaction as to their intent.

Question 47

52)Would an instrument containing the following language be negotiable? "Harold T. Stone, as President, hereby promises to pay $12,348 to the order of Joe Jones Furniture for office equipment for Redtyn Corporation, payable from its corporate assets. (Signed) Harold T. Stone as President, Redtyn Corporation."

A) No, because the promise refers to another contract.
B) No, because its payment is limited to a particular fund.
C) Yes, because Redtyn is a business entity.
D) Yes, because it meets all the requirements of negotiability.

Question 48

50)Negotiable instruments:

A) include drafts, promissory notes, assignments, and certificates of deposit.
B) are used primarily for smaller transactions.
C) in the form of checks have decreased in use since 2000.
D) have increased in usage to the point where they are now approximately equal to usage of cash for payments.

Question 49

60)All but which one of the following is required of a negotiable instrument?

A) It must be payable only out of a particular fund.
B) It must contain an unconditional promise or order to pay a fixed amount in money.
C) It must be payable on demand or at a definite future date.
D) It must be in writing and signed by the maker or drawer.

Question 50

48)References to other agreements in negotiable instruments:

A) destroy negotiability unless the recital makes the instrument subject to, or governed by, the terms of another agreement.
B) do not destroy negotiability in any circumstances.
C) do not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement.
D) None of these.

Question 51

59)Which of the following would be an unconditional promise or order to pay?

A) "I hereby acknowledge my debt to John Jones."
B) "I hereby promise to pay $2,000 to John Jones provided the lawn tractor sold meets the contractual specifications."
C) "Pay to the order of bearer ten dollars."
D) "IOU fifty dollars."

Question 52

53)An instrument is payable to order if it is payable:

A) to the order of an identified person.
B) to an identified person or order.
C) Both of these.
D) Neither of these.

Question 53

56)A draft is payable "to the order of Joe Jones or to bearer." Sally finds it and demands payment. Should the drawer pay Sally?

A) No, unless Joe Jones's name is crossed off.
B) No, unless "bearer" is handwritten.
C) Yes, since the word "or" is contained in the instrument, either Joe Jones or the bearer of the draft may obtain payment.
D) No, the terminology is ambiguous and therefore the draft must be paid only to the order of Joe Jones.

Question 54

49)A promise or order is payable at a definite time if it is payable:

A) at a time readily ascertainable at the time the promise or order is issued.
B) at a fixed date or dates.
C) at a definite period of time after sight or acceptance.
D) All of these.

Question 55

43)Which of the following has been held to destroy the negotiability of an instrument and to render its transfer a contractual assignment?

A) "I wish you would pay."
B) "Pay to the order of John Jones."
C) "Pay bearer."
D) None of these.

Question 56

46)Which article of the UCC governs "negotiable instruments"?

A) Article 6.
B) Article 2.
C) Article 3.
D) Article 9.

Question 57

45)Which of the following notes would not be negotiable? A written, signed promise to pay:

A) $50,000 to the order of Crouch, and the maker of the note orally stated to Crouch that the money would only be paid if all contractual specifications were met.
B) $500 and a rick of firewood on or before September 10.
C) which includes a statement that, "This note is given in partial payment for a piano to be delivered in one week from date in accordance with a contract of this date between the maker and the payee."
D) All of these.

Question 58

57)The UCC states that an instrument fulfills the requirements of being payable to bearer if it:

A) states it is payable to bearer or the order of bearer.
B) does not state a payee.
C) states it is payable to "cash" or to the order of "cash."
D) All of these.

Question 59

55)A definite time required for negotiability would NOT be satisfied in which instance?

A) Payable on or before January 2, 2015.
B) Payable one year from the completion of the building
C) Payable one week after demand is made.
D) Payable on June 15, 2014 or, if the building is not complete on that date, one year from that date.

Question 60

47)A promise or order is unconditional unless it states that:

A) there is an express condition to payment.
B) the promise or order is subject to or governed by another writing.
C) rights or obligations concerning the order or promise are stated in another writing.
D) All of these.

Question 61

64)Who are the parties to checks and notes?

Question 62

66)Carlos wrote a check with the numbers $4500 and the written amount as forty-five dollars. Explain how the ambiguity will be resolved.

Question 63

62)What are the requirements of negotiability under the Code? List and briefly summarize them.

Question 64

61)Explain the effect that a reference to other agreements has on negotiable instruments and the difference between a mere reference and a negotiable instrument's being subject to the terms of another agreement.

Question 65

65)Expain whether each of the following would be negotiable or not negotiable.
a. A check with the amount payable omitted.
b. A draft for 3,000 bushels of corn.
c. A check written in pencil on a paper towel.
d. A note stating that it is secured by a mortgage on a specified parcel of land.
e. A note stating "IOU fifty dollars."

Question 66

63)Distinguish between a note and a certificate of deposit. How are they alike? How are they different? Explain your answer.

Question 67

67)Identify which of the following meet the Article 3 negotiability requirement of being payable at a definite time: (a) A note payable "on or before June 14, 2014." (b) A dated instrument payable "30 days after date." (c) An undated instrument payable "30 days after date." (d) An instrument payable "when Baxter is promoted to plant manager." (e) A note payable on December 31, subject to acceleration by the holder." (f) A note granting the holder the option to extend maturity of the instrument for an indefinite period.