Question 1

A minor who makes a cheque payable to a holder is always liable to the holder.

Accepted Answer

A minor is generally not liable on a cheque or any contract due to the incapacity to contract, as they are not considered legally competent to enter into binding agreements.

Question 2

Only real defences can be used to block the claim of a holder in due course.

Accepted Answer

According to the Uniform Commercial Code (UCC), only real defenses such as fraud or forgery can be used to block the claim of a holder in due course. Other defenses such as breach of contract between the original parties are not valid against a holder in due course.

Question 3

Presentment of a bill is necessary where the bill of exchange is payable at sight,or after sight,because there is the need to determine the time at which payment is due.

Accepted Answer

Presentment of a bill is necessary to determine the time at which payment is due, especially for bills of exchange that are payable at sight or after sight.

Question 4

Joseph obtains a draft that states as follows: "pay to the order of Joseph Daniels the sum of $1000." Joseph wants to negotiate this instrument to Jack Spratt to pay a debt owing to Jack.To negotiate this instrument,Joseph must

Accepted Answer

To negotiate the instrument, Joseph must endorse (sign) it on the back and then deliver it to Jack. By endorsing it, Joseph is transferring the ownership rights of the instrument to Jack, who can then present it for payment or negotiate it further. Option A is incorrect as "accepted" is not a proper endorsement. Option C is incorrect as there is no need for the instrument to be accepted by Jack's bank. Option D is also incorrect as presenting it to Jack's bank is not necessary. Option E is incorrect as simply handing over the draft without endorsement does not transfer ownership rights.

Question 5

A court will impose liability for payment if all of the following are true EXCEPT

Accepted Answer

Notice of arbitration is not required for imposing liability for payment. The other options are necessary for imposing liability for payment.

Question 6

On the death of a maker or acceptor of a bill of exchange,her or his liability passes to her or his personal representatives.

Accepted Answer

This statement is true. When a maker or acceptor of a bill of exchange dies, their liability passes on to their personal representatives, who are responsible for paying off the debt or fulfilling the obligation outlined in the bill.

Question 7

The difference between a cheque and draft is that

Accepted Answer

The drawee on a cheque is always a bank or financial institution, whereas the drawee of a draft can be a financial institution or a bank.

Question 8

Liability of the drawer,acceptor,or maker on a bill of exchange is dependent on

Accepted Answer

The answer of Liability of the drawer,acceptor,or maker on a...

Question 9

Negotiable instruments began as a form of bill of exchange.

Accepted Answer

Negotiable instruments are a type of commercial paper that allow for the transfer of money or payment of a sum of money. They originated as bills of exchange in the 12th century and evolved into other forms such as promissory notes and checks.

Question 10

A remote party who fails to meet the standards of a holder in due course is subject to real defences only.

Accepted Answer

A remote party who fails to meet the standards of a holder in due course is subject to both real and personal defenses. A holder in due course is protected against most defenses, but someone who does not qualify as such does not have this level of protection.

Question 11

A person who negotiates an instrument in bearer form is known as

Accepted Answer

A negotiable instrument in bearer form is one that is payable to whoever holds the instrument at the time of payment. Therefore, the person who negotiates this kind of instrument by delivering it to someone else is known as a transferor by delivery.

Question 12

Liability of the drawee on a bill of exchange is dependent on

Accepted Answer

The liability of the drawee on a bill of exchange is dependent on the acceptance and delivery of the bill. Once the drawee accepts the bill, they become liable to pay the amount mentioned in the bill to the holder. Delivery of the bill is also important as it signifies the transfer of ownership of the bill. Signing, negotiation, and presentment are important steps in the process of a bill of exchange, but they do not determine the liability of the drawee.

Question 13

Many retail businesses have taken steps to minimize the risks associated with negotiable instruments.These steps include

Accepted Answer

The answer of Many retail businesses have taken steps to...

Question 14

The two classes of negotiable instruments are

Accepted Answer

The answer of The two classes of negotiable instruments are
...

Question 15

Tina gave Zach a cheque for $1000 to pay for a TV.Zach took the cheque to Cash Mart,he endorsed it,and Cash Mart paid him $950.Cash Mart is a holder in due course of a negotiable instrument.

Accepted Answer

Since Cash Mart is a holder in due course of a negotiable instrument (the cheque), they have the right to receive payment for it regardless of any claims or defenses that Tina may have against Zach. As such, the fact that they paid Zach $950 for the cheque makes them a holder in due course.

Question 16

A buyer on consumer credit has no defence against a finance company that sues him as holder of his promissory note.

Accepted Answer

A buyer on consumer credit may have defenses against a finance company that sues him as the holder of his promissory note if the sale was subject to consumer protection laws, which can provide various defenses related to fraud, misrepresentation, or breach of warranty by the seller.

Question 17

Which of the following is NOT a real defence to an action on a bill?

Accepted Answer

The answer of Which of the following is NOT a...

Question 18

Where a bill of exchange is payable at sight,or after sight,presentment is necessary.

Accepted Answer

According to negotiable instrument law, a bill of exchange that is payable at sight or after sight requires presentment for payment. Presentment is the act of presenting the bill of exchange to the drawee for acceptance or payment.

Question 19

A holder in due course who suffers a loss arising from a forged endorsement can recover from the party who acquired the instrument immediately following the forgery.

Accepted Answer

A holder in due course is protected under the Uniform Commercial Code (UCC) and can recover losses from the party who acquired the instrument immediately following the forgery because that party warranted the authenticity of the endorsement when they transferred the instrument.

Question 20

Delivery of a bill may be actual or

Accepted Answer

Delivery of a bill may be actual or constructive. Actual delivery is when the bill is physically handed over to the recipient, while constructive delivery occurs when the bill is made available to the recipient, such as leaving it at their place of work or mailing it to their address. Ineffective, incomplete, by notification, and pretend are not valid options for delivery of a bill.

Quiz 19: Negotiable Instruments