Question 1

Madolyn's father executes a promissory note stating,"I promise to pay to the order of my daughter,Madolyn,$50,000,on the date that she marries Robbie Roberts." Is the note negotiable?

Accepted Answer

The answer of Madolyn's father executes a promissory note stating,"I...

Question 2

Identify the following instrument,identify the role of each party,and identify the characteristics of the instrument.
To: Morgan Associates Date: May 7,2003
Pay to the order of Henry H.Higgins,
One thousand and 00/100 Dollars,on June 7,2003.
Mareena Kaluchi
Mareena Kaluchi

Accepted Answer

The answer of Identify the following instrument,identify the role of...

Question 3

Determine whether the following instrument is a negotiable instrument,addressing all the requirements of negotiability in your response.
"I,Orville Wright,promise to pay $5,000 to Billy's Bicycle Parts in four equal installments of principal,beginning on January 1,2004,and on the same day in each of the next 3 years.Each payment will consist of $1,250 in principal,plus interest accrued since the date of this note,in the case of the first payment,or since the prior payment in the case of all other payments.Interest shall accrue at the rate of 8% per annum,or in the event of default,at the maximum rate allowed by law until the default is cured.This note is secured by collateral consisting of various experimental flying machines.This note may be paid in whole or in part prior to the due dates,and the interest accrued will be reduced accordingly.The due date for any payment under this note may be extended by mutual agreement of the parties up to 6 months from the due date as stated herein.The proceeds of this note will be used by Orville Wright to further his aviation experiments,and in the event those experiments are unsuccessful,the payment obligation is canceled.
Signed,Orville Wright 1/1/03

Accepted Answer

The answer of Determine whether the following instrument is a...

Question 4

Jane owes Bob $500.Bob requests that Jane sign a document,so Jane signs the following document: "I owe Bob $500.(Signed)Jane." This document is:

Accepted Answer

The answer of Jane owes Bob $500.Bob requests that Jane...

Question 5

If one instrument stated,"Pay to the Order of IBM," and the other stated,"Pay to IBM," which instrument would be negotiable?

Accepted Answer

"Pay to the Order of IBM" creates a negotiable instrument as it contains the key phrase "to the order of." This phrase signifies that the instrument can be transferred to another party through endorsement. "Pay to IBM" does not contain this phrase and is not considered a negotiable instrument.

Question 6

The law of negotiable instruments was designed to create a substitute for cash and to facilitate commerce.Has the importance of negotiable instruments in commerce increased or decreased in recent years? How will increased online commerce affect the importance of negotiable instruments?

Accepted Answer

The answer of The law of negotiable instruments was designed...

Question 7

Sandy signs a negotiable instrument that orders Sally to pay $1,000 to the order of Pat on May 4,2001.What type of instrument is this?

Accepted Answer

A time draft is a type of negotiable instrument that orders the payment of a specific amount of money at a future date. In this case, the order is for Sally to pay $1,000 to the order of Pat on May 4, 2001, which is a future date. Therefore, the instrument is a time draft. The other options do not fit the description of the instrument.

Question 8

Which of the following would qualify as a negotiable instrument?

Accepted Answer

A negotiable instrument is a written document that is a promise or order to pay a specific sum of money. It must be payable on demand or at a certain time, and it must be transferable to another person. Currency is considered legal tender and is commonly used as a negotiable instrument. Gold, diamonds, and stocks are not typically used as negotiable instruments.

Question 9

Which of the following statements,if it appeared on a negotiable instrument,would destroy the negotiability of that instrument?

Accepted Answer

Incorporating by reference a separate agreement (like a sales contract) makes the terms of the negotiable instrument dependent on that agreement, thus destroying its negotiability.

Question 10

What problems hinder any efforts to establish uniform international rules for negotiable instruments? What additional variables are there in trying to establish a uniform international set of rules for negotiable instruments compared to doing so solely within the United States?

Accepted Answer

The answer of What problems hinder any efforts to establish...

Question 11

Karen has a checking account at First Bank.Karen writes a check to Bonanza Apartments for her rent.In this situation:

Accepted Answer

Karen is the one who wrote the check, so she is the drawer. First Bank is the bank where Karen has her checking account, so they are the drawee. Bonanza Apartments is the one who will receive and can cash the check, so they are the payee. Therefore, option A is the correct choice.

Question 12

Alice Johnson issued a note payable over 24 equal monthly installments.The note contained a provision making the entire balance due immediately if Alice defaulted on two consecutive installments.The note contained:

Accepted Answer

The provision in the note that makes the entire balance due immediately if Alice defaults on two consecutive installments is an acceleration clause. This clause allows the lender to demand payment of the entire balance of the note if the borrower defaults on the payment terms.

Question 13

What is the effect of a promissory note containing a conditional promise?

Accepted Answer

A promissory note containing a conditional promise is enforceable even though it is nonnegotiable. This means that the promise can only be enforced between the parties involved in the note, and it cannot be transferred to another party. However, the condition must be clearly stated in the note and must be within the control of the promisor. If the condition is not met, the promise is not enforceable.

Question 14

Which of the following would NOT create an express promise to pay?

Accepted Answer

While stating "I owe you $100" implies that there is a debt that needs to be repaid, it does not create a specific promise to pay on a particular date or under certain conditions. It lacks the specific language of a promissory statement.

Question 15

Is the following instrument negotiable?"I promise to pay to the order of Mary Atkins the sum of $500 plus interest at the legal rate,on January 3,2003.The interest rate shall be 15 percent per year after January 3,2003.Further,I will pay the costs of collection if legal action is necessary to collect this amount.Dated this January 3,2001.(Signed)Colleen Smith."

Accepted Answer

The instrument contains an unconditional promise to pay a fixed amount of money, with or without interest, and is payable to order at a future date, meeting the requirements for negotiability.

Quiz 22: Creation of Negotiable Instruments