Deck 12: Negotiable Instruments, credit, and Bankruptcy

Question 1

A financial institution that receives a promissory note has the right to:

A)sell the note to another party
B)demand the U.S.Treasury redeem the note
C)change the interest terms of the note
D)demand repayment of the loan before the originally agreed upon time
E)none of the other choices are correct

Answer 1

A

Question 2

A(n)______________ functions as a substitute for cash.

A)parley
B)easement
C)debtor instrument
D)notable instrument
E)none of the other choices are correct

Answer 2

E

Question 3

A(n)_____________ is a note promising to repay borrowed money,probably with interest.

A)negotiable instrument
B)negotiable note
C)promissory note
D)lending note
E)borrowing note

Answer 3

C

Question 4

Every year,creditors have to absorb ______________ in unpaid debt:

A)about $10 million
B)about $1 billion
C)about $20 million
D)about $50 million
E)none of the other choices are correct

Question 5

Negotiable instruments are not:

A)substitutes for cash
B)credit devices
C)subject to Article 2 of the UCC
D)devices for making business deals easier
E)all of the other choices

Question 6

The law of negotiable instruments has it origins in:

A)France
B)Rome
C)England
D)Spain
E)Ancient Greece

Question 7

If a negotiable instrument is ____________,the transferee takes the instrument free of any of the transferor's contract obligations.

A)transferred by assignment
B)delegated
C)transferred by court
D)assigned
E)none of the other choices are correct

Question 8

If a negotiable instrument is ____________,the transferee takes the instrument free of any of the transferor's contract obligations.

A)transferred by assignment
B)transferred by negotiation
C)transferred by court
D)assigned
E)delegated

Question 9

Negotiable instruments are a part of the commercial law through:

A)Article 2 of the UCC
B)Article 3 of the UCC
C)Article 3 of the CISG
D)Article 3 of the Constitution
E)Article 3 of the Universal Trade Code

Question 10

Negotiable instruments function as:

A)substitutes for cash
B)credit devices
C)devices for making business deals easier
D)are subject to Article 3 of the UCC
E)all of the other choices

Question 11

Negotiable instruments:

A)substitute for cash
B)are generally also gold certificates
C)make business deals more difficult
D)are part of federal regulatory controls
E)none of the other choices

Question 12

Before passage of laws affecting negotiable instruments:

A)the right to payment was a contract right that could not be sold
B)business was done on a cash basis only
C)businesses were required to maintain large cash reserves (or cash equivalents,such as land or other property)as a guarantee of future payment for credit sales
D)it was possible to buy products internationally only by opening a letter of credit as a guarantee of payment
E)credit cards were the most common exchange form used

Question 13

Negotiable instruments are not:

A)substitutes for cash
B)credit devices
C)devices for making business deals easier
D)generally subject to Article 3 of the UCC
E)none of the other choices

Question 14

The law of negotiable instruments has its origins in:

A)France
B)Rome
C)Kenya
D)Spain
E)none of the other choices are correct

Question 15

Every year,creditors have to absorb ______________ in unpaid debt:

A)about $100 million
B)about $5 billion
C)over $20 billion
D)less than $5 million
E)about $20 million

Question 16

If an instrument is made __________,the party in possession is required only to deliver the instrument to transfer it.

A)"to transferee"
B)"to holder"
C)"to possessor"
D)"to bearer"
E)"to recipient"

Question 17

A(n)______________ functions as a substitute for cash.

A)parley
B)easement
C)negotiable instrument
D)notable instrument
E)credit instrument

Question 18

Negotiable instruments are a part of the commercial law through:

A)Article 2 of the UCC
B)Article 3 of the Universal Trade Code
C)Article 3 of the CISG
D)Article 3 of the Constitution
E)none of the other choices are correct

Question 19

If a negotiable instrument is __________,the assignee has the same contract rights and responsibilities as the assign-or.

A)assigned
B)delegated
C)returned
D)negated
E)realigned

Question 20

A(n)_____________ is a note promising to repay borrowed money,probably with interest.

A)negotiable instrument
B)negotiable note
C)borrowing note
D)lending note
E)none of the other choices are correct

Question 21

Nonnegotiable instruments are governed by:

A)the Supreme Court
B)the CISG
C)the common law of contracts
D)the common law of arbitration
E)none of the other choices are correct

Question 22

Although commercial paper may be either negotiable or nonnegotiable,only __________ fall under the UCC.

A)nonnegotiable instruments
B)conditional instruments
C)real instruments
D)unconditional instruments
E)none of the other choices are correct

Question 23

Negotiable instruments are governed by:

A)the UCC
B)the CISG
C)the common law of contracts
D)the common law of arbitration
E)the Supreme Court

Question 24

To transfer an instrument made "to the order" of the payee,the payee must:

A)endorse the instrument
B)deliver the instrument to a third party
C)destroy the original instrument
D)both a and b are necessary
E)none of the other choices are correct

Question 25

Which of the following is one of the UCC's requirements for an instrument to be negotiable:

A)it must be oral
B)it must not state a certain sum of money
C)it must be payable on demand or at a specified time
D)none of the other specific choices are correct
E)all of the other specific choices are correct

Question 26

To transfer an instrument made "to the order" of the payee,the payee must:

A)endorse,but not deliver the instrument to a third party
B)have the instrument rewritten by a district court official
C)destroy the original instrument
D)create an addendum to the original instrument
E)none of the other choices are correct

Question 27

Negotiable instruments are governed by:

A)the Supreme Court
B)the CISG
C)the common law of contracts
D)the common law of arbitration
E)none of the other choices are correct

Question 28

Although commercial paper may be either negotiable or nonnegotiable,only __________ fall under the UCC.

A)nonnegotiable instruments
B)negotiable instruments
C)real instruments
D)unconditional instruments
E)conditional instruments

Question 29

Which of the following is one of the UCC's requirements for an instrument to be negotiable:

A)it must be oral
B)it must not state a certain sum of money
C)it must be made out "to order" or "to bearer"
D)none of the other specific choices are correct
E)all of the other specific choices are correct

Question 30

Which of the following is one of the UCC's requirements for an instrument to be negotiable:

A)it must be written
B)it must not state a certain sum of money
C)it need not be payable on demand or at a specified time
D)none of the other specific choices are correct
E)all of the other specific choices are correct

Question 31

A(n)____________has the same contract responsibilities as an assignee under a nonnegotiable instrument.

A)holder in due course
B)temporary holder
C)regular holder
D)nonnegotiable holder
E)none of the other choices are correct

Question 32

Which of the following is one of the UCC's requirements for an instrument to be negotiable:

A)it must be oral
B)it must state a certain sum of money
C)it need not be payable on demand or at a specified time
D)none of the other specific choices are correct
E)all of the other specific choices are correct

Question 33

A(n)____________has the same contract responsibilities as an assignee under a nonnegotiable instrument.

A)holder in due course
B)ordinary holder
C)regular holder
D)nonnegotiable holder
E)temporary holder

Question 34

Nonnegotiable instruments are governed by:

A)the Supreme Court
B)the CISG
C)the UCC
D)arbitration rules
E)none of the other choices are correct

Question 35

Governments disfavor bearer instruments because:

A)transactions with bearer instruments are not taxable
B)transactions with bearer instruments are illegal
C)law enforcement agencies find it difficult to trace money transferred in bearer form
D)bearer instruments cannot be used to fund political campaigns
E)transactions involving bearer instruments are not covered by the UCC

Question 36

Which of the following is one of the UCC's requirements for an instrument to be negotiable:

A)it must be written
B)it must state a certain sum of money
C)it must be made out "to order" or "to bearer"
D)it must be payable on demand or at a specified time
E)all of the other specific choices are correct

Question 37

If an instrument is made __________,the party in possession is required only to deliver the instrument to transfer it.

A)"to transferee"
B)"to holder"
C)"to possessor"
D)"to recipient"
E)none of the other choices are correct

Question 38

Which of the following is one of the UCC's requirements for an instrument to be negotiable:

A)it must be written
B)it must be an unconditional order or promise to pay
C)it must be signed by the maker or drawer
D)it must be payable on demand or at a specified time
E)all of the other specific choices are correct

Question 39

To transfer an instrument made "to the order" of the payee,the payee must:

A)endorse and deliver the instrument to a third party
B)have the instrument rewritten by a district court official
C)destroy the original instrument
D)create an addendum to the original instrument
E)none of the other choices are correct

Question 40

Governments disfavor bearer instruments because:

A)transactions with bearer instruments are not taxable
B)transactions with bearer instruments are illegal
C)transactions involving bearer instruments are not covered by the UCC
D)bearer instruments cannot be used to fund political campaigns
E)none of the other choices are correct

Question 41

Which of the following requirements is necessary to be a holder in due course:

A)the transferee must not give value for the negotiable instrument
B)the transferee know the transferer
C)the transferee must take the instrument in good faith
D)all of the other specific choices are necessary
E)none of the other specific choices are necessary

Question 42

To be found a holder in due course,a transferee must:

A)be in possession of an instrument in the form of either a draft or a check (but not a note)made out "to bearer "
B)have agreed in writing not to be bound as a contractual assignee
C)have given value for the negotiable instrument,taken it without knowledge of any defects and in good faith
D)provided a signed unconditional writing,promising (or ordering to pay),at a specified time in the future and made out "to order" or "to bearer "
E)all of the other choices are required to be a holder in due course

Question 43

If a negotiable instrument is assigned,the assignee has:

A)the same contract rights and responsibilities as the assignor
B)the same contract rights as the assignor,but is relieved of assignor's responsibilities
C)the same responsibilities as the assignor,but not the contract rights of the assignor
D)neither the rights or responsibilities of the assignors;those are determined by a new contract between the parties
E)none of the other choices

Question 44

Payment practices vary around the world.Islamic law is interpreted by many Muslims to mean that interest payments are prohibited by the Koran.In practice,this means that in countries that practice Islamic law:

A)there is no borrowing or lending
B)all borrowing is done at zero interest rate
C)borrowing is done by lending arrangements that pay the equivalent of interest
D)interest payments must be donated to religious organizations
E)none of the above

Question 45

TP sells franchises in the Old Fast Food chain.TP sells a franchise to Choi for $100,000 by cashier's check.Choi then hears that TP is going out of business and tries to stop payment on the check.TP has already transferred the money to a third party who meets the UCC's requirements for a holder in due course.The bank paid that third party.TP declares it is out of business.In a subsequent lawsuit:

A)the court will find that the third party is a holder in due course and,despite the fact that TP has defrauded Choi,not require the third party to repay Choi
B)because of the fraud involved,the court will require the third party repay Choi
C)because the instrument involved was a cashier's check and not an ordinary check,the court will not require the third party to repay Choi
D)because the amount in controversy was more than $50,000,the courts will be empowered to view the fraud as a felony and will ignore the requirements of the UCC
E)none of the other choices

Question 46

The one who agreed to make a payment,such as a bank making a payment based on a document presented to it is:

A)the payee
B)the beneficiary
C)the drawer
D)the drawee
E)none of the other choices

Question 47

If a negotiable instrument is transferred by negotiation,the transferee takes the instrument:

A)with all of the transferor's rights and responsibilities
B)with all of transferor's responsibilities,but none of the rights
C)with the duties that have been assigned to the instrument by the bearer
D)with the rights that have been assigned to the instrument by the holder in due course
E)none of the other choices

Question 48

Which of the following requirements is necessary to be a holder in due course:

A)the transferee must give value for the negotiable instrument
B)the transferee know the transferer
C)the transferee must not take the instrument in good faith
D)all of the other specific choices are necessary
E)none of the other specific choices are necessary

Question 49

Negotiable instruments under the UCC do not include:

A)notes
B)certificates of deposit
C)cash
D)promissory notes
E)all of the other choices are negotiable instruments subject to UCC

Question 50

If an instrument is found to be negotiable under the UCC,it may be freely traded without concern for any existing contract responsibilities if the instrument is in the possession of a holder in due course.To be a holder in due course,one must:

A)accept the transfer of the instrument with the same contract responsibilities as the person assigning the instrument
B)give value for the instrument,accept it without knowledge of any defects (for example,that it is overdue),and take the instrument in good faith
C)present himself as having knowledge or skill specialized to the transaction and regularly deal in that kind of transaction
D)demonstrate that the instrument falls within the scope of Article 3 of the UCC,that the transaction is not for the sale of a tangible product,and that any defects in the title to the goods involved in the transaction is not known to the party
E)none of the other choices,there are no special requirements

Question 51

If an instrument is determined to be nonnegotiable,and a dispute arises,Article 3 will:

A)apply the same as it does in the case of disputes involving negotiable instruments with the exception that the rights and remedies available to the parties are more flexible for nonnegotiable instruments under Article 3 (because the potential consequences to holders is less of a financial burden)
B)apply as long as the instrument has not been assigned to a third party
C)not apply,the parties refer to the rules of the Chamber of Commerce
D)not apply and the parties will resolve their dispute with reference to the sale of goods under Article 2
E)none of the other choices

Question 52

Besides being written,an unconditional order or promise to pay,must be made out for a definite sum of money.To be negotiable under Article 3 of the UCC,an instrument also must meet which of the following requirements it:

A)must be payable on demand or at a specified time period
B)must be made out "to order" or "to bearer "
C)must be signed by the maker or the drawer
D)must be payable on demand or at a specified time period and must be signed by the maker or the drawer
E)must be payable on demand or at a specified time period and must be signed by the maker or the drawer and must be made out "to order" or "to bearer"

Question 53

TP sells franchises in the Old Fast Food chain.TP sells a franchise to Choi for $100,000 by cashier's check.Choi then hears that TP is going out of business and tries to stop payment on the check.TP has already transferred the money to a third party who meets the UCC's requirements for a holder in due course.The bank paid that third party.TP declares it is out of business.In a subsequent lawsuit:

A)the court will find that the third party liable as surety
B)because of the fraud involved,the court will require the third party repay Choi
C)because the instrument involved was a cashier's check and not an ordinary check,the court will not require the third party to repay Choi
D)because the amount in controversy was more than $50,000,the courts will be empowered to view the fraud as a felony and will ignore the requirements of the UCC
E)none of the other choices

Question 54

To be found a holder in due course,a transferee must:

A)be in possession of an instrument in the form of either a draft or a check (but not a note)made out "to bearer "
B)have agreed in writing not to be bound as a contractual assignee
C)simply be in possession of a negotiable instrument
D)provided a signed unconditional writing,promising (or ordering to pay),at a specified time in the future and made out "to order" or "to bearer "
E)none of the other choices

Question 55

Which of the following requirements is necessary to be a holder in due course:

A)the transferee must give value for the negotiable instrument
B)the transferee must take the instrument without knowledge that it is overdue or defective
C)the transferee must take the instrument in good faith
D)all of the other specific choices are necessary
E)none of the other specific choices are necessary

Question 56

Negotiable instruments do not include:

A)notes
B)certificates of deposit
C)checks
D)promissory notes
E)all of the other choices are negotiable instruments

Question 57

If a negotiable instrument is transferred by negotiation,the transferee takes the instrument:

A)with all of the transferor's rights and responsibilities
B)free of the transferor's responsibilities
C)with the duties that have been assigned to the instrument by the bearer
D)with the rights that have been assigned to the instrument by the holder in due course
E)none of the other choices

Question 58

If an instrument is determined to be nonnegotiable,and a dispute arises,Article 3 will:

A)apply the same as it does in the case of disputes involving negotiable instruments with the exception that the rights and remedies available to the parties are more flexible for nonnegotiable instruments under Article 3 (because the potential consequences to holders is less of a financial burden)
B)apply as long as the instrument has not been assigned to a third party
C)not apply and the parties will need to resolve their dispute with reference to the common law of contracts
D)not apply and the parties will resolve their dispute with reference to the sale of goods under Article 2
E)none of the other choices

Question 59

If a negotiable instrument is assigned,the assignee has:

A)no rights or liabilities after assignment
B)the same contract rights as the assignor,but is relieved assignor's responsibilities
C)the same responsibilities as the assignor,but not the contract rights of the assignor
D)neither the rights or responsibilities of the assignors;those are determined by a new contract between the parties
E)none of the other choices

Question 60

If an instrument is found to be negotiable under the UCC,it may be freely traded without concern for any existing contract responsibilities if the instrument is in the possession of a holder in due course.To be a holder in due course,one must:

A)accept the transfer of the instrument with the same contract responsibilities as the person assigning the instrument
B)receive the instrument as a gift in good faith with no liabilities attached
C)present himself as having knowledge or skill specialized to the transaction and regularly deal in that kind of transaction
D)demonstrate that the instrument falls within the scope of Article 3 of the UCC,that the transaction is not for the sale of a tangible product,and that any defects in the title to the goods involved in the transaction is not known to the party
E)none of the other choices

Question 61

With negotiable instruments,the party to receive payment is the:

A)beneficiary
B)drawer
C)payer
D)drawee
E)secondary party

Question 62

The _________ agrees to make the payment,such as the bank making a payment based on a document presented to it.

A)drawee
B)drawer
C)payee
D)checker
E)beneficiary

Question 63

With negotiable instruments,the party to receive payment is the:

A)secondary party
B)drawer
C)payer
D)drawee
E)none of the other choices are correct

Question 64

A "draft drawn on a bank and payable on demand" is a:

A)promissory note
B)note
C)certificate of deposit
D)deposit slip
E)none of the other choices are correct

Question 65

Under Article 3 of the UCC,a check is:

A)an unconditional written order to pay that involves three parties: a drawer,drawee,payee;the drawee may be a bank,person,or business.Payment may be set at some future time
B)a draft drawn on a bank and payable on demand
C)a promise by one party to pay a certain sum of money to another party;two parties are involved: the maker and the payee;payment may be set at some future date
D)an acknowledgment by a bank that it has received money from a customer with a promise from the bank that it will repay the money received either at a specified date or upon demand;two parties are involved: a maker and a payee
E)none of these

Question 66

Under Article 3 of the UCC,a check is:

A)an unconditional written order to pay that involves three parties: a drawer,drawee,payee;the drawee may be a bank,person,or business.Payment may be set at some future time
B)an unconditional written order to pay that involves two parties: drawer and payee;the payment is at an agreed upon future date
C)a promise by one party to pay a certain sum of money to another party;two parties are involved: the maker and the payee;payment may be set at some future date
D)an acknowledgment by a bank that it has received money from a customer with a promise from the bank that it will repay the money received either at a specified date or upon demand;two parties are involved: a maker and a payee
E)none of these

Question 67

The one who issues or creates the document that requests payment,probably from a bank,is called:

A)the payee
B)the beneficiary
C)the drawer
D)the drawee
E)none of the other choices

Question 68

The one who receives payment from a negotiable instrument is called:

A)the negotiator
B)the checker
C)the drawer
D)the drawee
E)none of the other choices

Question 69

The ___________ issues or creates the document that requests payment,probably from a bank,but it could be from another party.

A)drawee
B)drawer
C)checker
D)payee
E)payer

Question 70

The most commonly used form of draft is a:

A)check
B)note
C)certificate of deposit
D)deposit slip
E)promissory note

Question 71

The most commonly used form of draft is a:

A)promissory note
B)note
C)certificate of deposit
D)deposit slip
E)none of the other choices are correct

Question 72

A "draft drawn on a bank and payable on demand" is a:

A)check
B)note
C)certificate of deposit
D)deposit slip
E)promissory note

Question 73

A check must be paid:

A)on demand
B)at a later date
C)no later than 3 months after it is issued
D)within the year it is issued
E)none of the other choices are correct

Question 74

The _________ agrees to make the payment,such as the bank making a payment based on a document presented to it.

A)beneficiary
B)drawer
C)payee
D)checker
E)none of the other choices are correct

Question 75

The one who receives payment from a negotiable instrument is called:

A)the payee
B)the checker
C)the drawer
D)the drawee
E)none of the other choices

Question 76

With negotiable instruments,the party to receive payment is the:

A)payee
B)drawer
C)payer
D)drawee
E)secondary party

Question 77

The one who agreed to make a payment,such as a bank making a payment based on a document presented to it is:

A)the payee
B)the beneficiary
C)the drawer
D)the checker
E)none of the other choices

Question 78

A check must have _____________ as its drawee.

A)a court
B)an individual
C)a corporation
D)a bank
E)none of the other choices are correct

Question 79

The one who issues or creates the document that requests payment,probably from a bank,is called:

A)the payee
B)the beneficiary
C)the checker
D)the drawee
E)none of the other choices

Question 80

The ___________ issues or creates the document that requests payment,probably from a bank,but it could be from another party.

A)drawee
B)payer
C)checker
D)payee
E)none of the other choices are correct