Deck 28: Kinds of Instruments, parties, and Negotiability

Question 1

Negotiability is the characteristic that distinguishes commercial paper and instruments from ordinary contracts.

Answer 1

True

Question 2

Instruments are negotiable when they contain the terms required by contract law.

Answer 2

False

Question 3

If an instrument is negotiable,it is governed by Article 2 of the UCC.

Answer 3

False

Question 4

The person on whom the order to pay a draft is made is called a drawer.

Question 5

A nonnegotiable instrument's terms are not enforceable.

Question 6

A payee is not liable on an instrument until the payee transfers the instrument to someone else.

Question 7

The payee has no rights in an instrument until the drawer or the maker has delivered it to the payee.

Question 8

A drawee on a draft has no responsibility under the draft until it has accepted that instrument.

Question 9

When a drawee has signified in writing on a draft the willingness to make a specified payment,the drawee is called the acceptor.

Question 10

The maker is the person who writes out and creates a promissory note.

Question 11

Instruments are transferable,written,signed promises or orders to pay a specified sum of money.

Question 12

A negotiable instrument may be partly printed and partly typewritten.

Question 13

Negotiation of commercial paper results in lesser rights to transferees than those rights afforded assignees of contracts under contract law.

Question 14

Commercial paper facilitates the transfer of funds and payment.

Question 15

When a party who is not originally named in an instrument allows her name to be added to it for the benefit of another party in order to add strength to the collectability of the instrument,that party becomes a secondary obligor and assumes a liability role.

Question 16

The signature on an instrument must appear at the lower right-hand corner of the face of the instrument.

Question 17

If an instrument is nonnegotiable,the rights of the parties are governed by the general principles of contract law.

Question 18

Instruments are always negotiable.

Question 19

Revised UCC Article 3 refers to drawers,indorsers,and accommodation parties as "secondary obligors."

Question 20

The drawee on a check is a bank.

Question 21

Revised UCC Article 3 refers to which of the following parties as secondary obligors?

A)drawers
B)indorsers
C)accommodation parties
D)all of the above

Question 22

If an order or promise is not for money,the instrument is not negotiable.

Question 23

The person to whom the order in a draft is addressed is known as the:

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

Question 24

An authorized agent signing an instrument will not be liable on the instrument if the agent discloses on the paper either the identity of the principal or the fact that the agent has signed in a representative capacity.

Question 25

The requirement of a sum certain in money is fulfilled even though the interest rate changes at maturity.

Question 26

If an instrument states no time for payment,the note is payable on demand.

Question 27

A person who becomes a party to an instrument to add strength to the instrument for the benefit of another party to the instrument is called a:

A)benefactor.
B)secondary obligor.
C)collateral obligor.
D)contingent beneficiary.

Question 28

Article 3 of the UCC establishes a four year statute of limitations for most actions involving negotiable instruments.

Question 29

A check that is postdated ceases to be order paper.

Question 30

A payee has no rights in an instrument until:

A)the drawer or the maker has delivered the instrument to the payee.
B)an acceptor has been established.
C)an accommodation party has signed the instrument.
D)a guarantor has signed the instrument.

Question 31

An unconditional written promise made by one person to another,signed by the maker,that promises to pay on demand a specific sum of money to the bearer is a:

A)nonnegotiable draft.
B)bill of exchange.
C)promissory note.
D)certificate of deposit.

Question 32

The party who writes or creates a promissory note is called the:

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

Question 33

A(n)__________ instrument's terms are enforceable,but the instrument is treated simply as a contract governed by contract law.

A)nonnegotiable
B)negotiable
C)accommodation
D)secondary

Question 34

Antedating an instrument affects an instrument's negotiability.

Question 35

If instrument is negotiable,it can be:

A)paid on demand.
B)cancelled by the maker.
C)assigned by contract.
D)transferred by negotiation.

Question 36

A promissory note that is payable "on the date of my marriage" is nonnegotiable even if the maker of the note marries.

Question 37

In a negotiable instrument,the promise or order to pay must be unconditional.

Question 38

When the drawee of a draft has indicated by writing or record a willingness to pay the amount specified in the draft the drawee is called a(n):

A)acceptor.
B)accommodation party.
C)payee.
D)secondary obligator.

Question 39

An instrument is order paper when by its terms it is payable to the order of any person described in it,or to a person or order.

Question 40

If a check is made payable to Paolo,and Paolo signs on the back of the check,Paolo is:

A)the payee and the indorser.
B)the drawee and the indorser.
C)the payee and the endorsee.
D)only the indorser.

Question 41

Action taken by one on behalf of another is:

A)agency.
B)negotiability.
C)representative capacity.
D)Identification of principal.

Question 42

When ambiguous language exists:

A)words control figures if a conflict exists.
B)handwriting supersedes typewritten words or terms.
C)typewritten terms supersede preprinted terms.
D)all of the above.

Question 43

The signature requirement,as an element of negotiability,can be met by:

A)the use of initials.
B)a mark.
C)a trade name.
D)all of the above.

Question 44

Which of the following factors do not affect negotiability of an instrument?

A)A provision specifying the collateral that secures the debt.
B)The antedating of the instrument..
C)The omission of a date of execution.
D)None of the above affect negotiability.

Question 45

To be negotiable,an instrument must:

A)be in writing.
B)be signed by the maker or the drawer.
C)contain a promise or order to pay.
D)all of the above.

Question 46

Which of the following terms would make an instrument nonnegotiable?

A)It is dependent upon an event.
B)It is undated.
C)It is payable in foreign money.
D)It gives the holder the right to receive interest.

Question 47

Conville signed a note as an officer of the Hughesville Manufacturing Corporation,but she did not name the corporation in the note or indicate that she was acting as an officer for it.Later,she was sued by the Grange National Bank,the holder of the note.She raised the defense that the corporation was liable on the note.Who was liable?

Question 48

George was the maker of a written promissory note that stated that $500 would be paid on the sale of George's automobile.George initialed the note instead of writing his full name.The promissory note stated that it would be payable six months from the date.The promissory note was not dated.You now have come into possession of this note.Is this note negotiable? Discuss the elements of negotiability and whether each one has been met.

Question 49

Article 3 of the UCC establishes a __________-year statute of limitations for most actions involving negotiable instruments.

A)one
B)two
C)three
D)four

Question 50

An instrument is order paper if:

A)it is payable to bearer or the order of bearer.
B)it is payable to cash.
C)the last or only indorsement is a blank indorsement.
D)none of the above.

Question 51

An instrument is conditional if:

A)it contains an order for the payment of money out of a particular fund.
B)it is to be paid from the assets of an existing trust.
C)it is to be paid from the assets of an existing estate.
D)none of the above.

Question 52

An instrument is payable on demand if it is payable:

A)on or before a stated date.
B)at sight or presentation.
C)at a fixed time after acceptance.
D)all of the above.