Question 1

Who can the holder of a bill of exchange sue if it is dishonoured?

Accepted Answer

The holder of a bill of exchange can sue the drawer, acceptor, and any endorsers if the bill is dishonoured. This is because all these parties have, in various ways, guaranteed the payment of the bill, and thus, the holder has recourse against all of them.

Question 2

Where a cheque is made payable to Lucien Colbert, and on its reverse are written the words "For deposit only to the credit of L. Colbert,"

Accepted Answer

The endorsement "For deposit only to the credit of L. Colbert" is a restrictive endorsement because it restricts the manner in which the cheque can be used, specifically limiting it to deposit into the account of L. Colbert.

Question 3

Erin writes Lorie a promissory note for $500. Erin is the _________ and Lorie is the ________.

Accepted Answer

In the context of a promissory note, the person who creates the note and promises to pay is known as the "maker," and the person to whom the note is payable is referred to as the "bearer" if the note is payable to bearer or "payee" if it is payable to a specific person. Since the options do not include "payee," the correct terminology in this context is "maker" for Erin and "bearer" for Lorie.

Question 4

Magda purchased some new clothes at a clothing store and gave the salesclerk a cheque for the price of the goods as payment. If Magda had presented a certified cheque as payment, the acceptance of the cheque would extinguish the debt.

Accepted Answer

A certified cheque guarantees that the bank will pay the amount, but it does not extinguish the debt until the cheque is actually cashed and the funds are transferred.

Question 5

Once a bill is drawn it is sent to the ___________ for ___________. Before the date for payment it may be negotiated to others, called _______________ by way of ___________.

Accepted Answer

Once a bill is drawn, it is sent to the drawee for acceptance. Before the payment date, it can be negotiated to others, called holders, through endorsement.

Question 6

Which is a true statement?

Accepted Answer

Real defences are effective against holders, holders in due course, and endorsers. Defect of title defences are effective against holders and endorsers. Personal defences are effective against holders, and against endorsers if they are an immediate party.

Question 7

The most superior position in which parties to a negotiable instrument can find themselves is a(n)

Accepted Answer

A holder in due course holds the instrument free from many defenses that could be raised against the original payee, providing a superior position in terms of rights against the instrument.

Question 8

A paper reads: To: Empire Bank. Five days after the next full moon, pay to Nathan Montrose or anyone named by him the sum of $500. Signed: "Monica Traymoor," August 15, 2020. Most correctly, this is

Accepted Answer

This document is a bill of exchange because it is an order made by one person to another to pay money to a third person. It is also a negotiable instrument, which is a document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payer named on the document.

Question 9

Law relating to certified cheques in Canada are found in

Accepted Answer

The answer of Law relating to certified cheques in Canada...

Question 10

Which of the following are not negotiable instruments?

Accepted Answer

A bill of sale is not a negotiable instrument because it is a document that evidences the transfer of ownership of goods from one person to another and does not contain an unconditional promise or order to pay a specific amount of money, unlike cheques, certified cheques, cheques made payable to a fictitious entity like "Mickey Mouse," and promissory notes, which are all considered negotiable instruments.

Question 11

The legislation creating promissory notes is found in which statute?

Accepted Answer

The legislation governing promissory notes is found in the Bills of Exchange Act, which provides a legal framework for the creation, endorsement, and payment of promissory notes, among other negotiable instruments.

Question 12

Brendan prepared a cheque payable to Joey and placed it in the pocket of his coat. Later in the day, while shopping, his coat was stolen. Brendan may contact the bank upon which the cheque was drawn, and countermand payment of the cheque. The bank must thereafter refuse payment of the cheque if it should be presented for payment.

Accepted Answer

Brendan has the right to stop payment on the cheque by contacting his bank and issuing a stop payment order, which legally obligates the bank to refuse payment if the cheque is presented.

Question 13

A certified cheque is

Accepted Answer

A certified cheque is a bank's guarantee that the cheque will be paid, making it a liability of the bank rather than the drawer.

Question 14

Bill writes Nick a cheque for $500 on his account at the Friendly Bank. Bill is the _______ and Nick is the __________ and the Friendly Bank is the ______________.

Accepted Answer

In a cheque transaction, the drawer is the person who writes the cheque (Bill), the payee is the person to whom the cheque is written (Nick), and the drawee is the bank on which the cheque is drawn (Friendly Bank).

Question 15

A consumer note arises when

Accepted Answer

The answer of A consumer note arises when
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Question 16

Magda purchased some new clothes at a clothing store and gave the salesclerk a cheque for the price of the goods as payment. If the clothing shop owner took Magda's cheque to the bank, and had it certified, Magda's debt to the seller would be extinguished.

Accepted Answer

When a cheque is certified by the bank, it means the bank guarantees the amount on the cheque is available in the payer's account, effectively making the cheque as good as cash. Therefore, once the seller has the certified cheque, the debt is considered paid.

Question 17

Where a bill of exchange is used in a purchase and sale transaction for goods sold on credit terms, the bill is "accepted" by the

Accepted Answer

The buyer accepts the bill of exchange in a purchase and sale transaction for goods sold on credit terms. This signifies the buyer's agreement to pay the stated amount at the specified date.

Question 18

Does a bill of exchange have to be written?

Accepted Answer

A bill of exchange must be in writing to be valid, as specified by the Bills of Exchange Act. This act defines the requirements for such financial instruments, including the necessity for them to be written documents.

Question 19

Magda purchased some new clothes at a clothing store and gave the salesclerk a cheque for the price of the goods as payment. The acceptance of the cheque by the salesclerk constitutes payment of the debt in full.

Accepted Answer

Acceptance of a cheque is considered conditional payment until the cheque is successfully cleared and the funds are transferred from the payer's account to the payee's account.

Question 20

Magda purchased some new clothes at a clothing store and gave the salesclerk a cheque for the price of the goods as payment. The cheque is only conditional payment and remains so until the cheque is honoured by Magda's bank.

Accepted Answer

A cheque acts as a conditional payment because the transaction is not considered complete until the cheque is successfully cleared and honored by the bank. If the bank refuses to honor the cheque (e.g., due to insufficient funds in the account), the payment is not completed.

Quiz 28: Law of Negotiable Instruments