Question 1

Which of the following will destroy negotiability?

Accepted Answer

Making the instrument subject to the terms of another agreement destroys negotiability because it introduces uncertainty about the terms and conditions under which the instrument is to be paid, violating the requirement for a negotiable instrument to have a fixed and certain obligation.

Question 2

Negotiable instruments:

Accepted Answer

Checks, a form of negotiable instruments, have decreased in use since 2000 due to the rise of electronic payments and digital banking.

Question 3

Which of the following has been held to destroy the negotiability of an instrument and to render its transfer a contractual assignment?

Accepted Answer

The phrase "I wish you would pay" introduces a level of uncertainty and discretion that is inconsistent with the definiteness required for an instrument to be considered negotiable. Negotiable instruments must contain an unconditional promise or order to pay, and the inclusion of "I wish" suggests that payment is not obligatory, thereby destroying the instrument's negotiability and rendering its transfer a contractual assignment rather than a negotiation.

Question 4

All but which one of the following is required of a negotiable instrument?

Accepted Answer

A negotiable instrument cannot be limited to being payable only out of a particular fund; it must be an unconditional promise or order to pay.

Question 5

Which of the following does not fulfill the requirements of being payable to bearer according to t he UCC?

Accepted Answer

Under the Uniform Commercial Code (UCC), for an instrument to be considered payable to bearer, it must either specify that it is payable to bearer or to the order of bearer, not specify a payee, or be payable to cash or the order of cash. A misspelling of the payee's name does not meet these criteria and does not automatically make an instrument payable to bearer.

Question 6

Which of the following would be an unconditional promise or order to pay?

Accepted Answer

Option C, "Pay to the order of bearer ten dollars," is an unconditional promise or order to pay because it does not stipulate any conditions that must be met before the payment is made.

Question 7

Which article of the UCC governs "negotiable instruments"?

Accepted Answer

Article 3 of the Uniform Commercial Code (UCC) governs negotiable instruments, which include items like checks, notes, and drafts.

Question 8

References to other agreements in negotiable instruments:

Accepted Answer

References to other agreements in negotiable instruments do not destroy their negotiability unless the instrument explicitly states that it is subject to or governed by the terms of another agreement. This allows for the inclusion of references to other agreements for informational purposes without affecting the negotiability of the instrument.

Question 9

Bill's car broke down on a dark, rainy night. Along came Andy in his service station's four-wheel drive truck with tools and supplies in the back. Bill didn't have any credit cards and only $3.25 cash, so Andy told him to write a check or an IOU. Neither Andy nor Bill had any paper, so Bill wrote on the cover of Andy's lunchbox: "If my car is fixed right by Andy Walcott, I will pay him $150. (Signed) Bill Boyd." Andy indorses the note and takes it to a commercial factor for negotiation. The factor refuses, saying it is non-negotiable because it:

Accepted Answer

The factor refuses because the note's obligation to pay is conditional on the satisfactory repair of the car, making it non-negotiable.

Question 10

A promise or order is payable at a definite time if it is payable:

Accepted Answer

All of these conditions (A, B, C) make a promise or order payable at a definite time, as they all specify a time frame that can be determined when the promise or order is issued.

Question 11

Which of the following would not be negotiable?

Accepted Answer

Negotiable instruments must be for a fixed amount of money. Choice B includes payment in the form of a rick of firewood, which is not a fixed monetary amount, making it non-negotiable.

Question 12

Which of the following would be a bearer instrument?

Accepted Answer

The answer of Which of the following would be a...

Question 13

X signs a negotiable instrument ordering Y to pay Z the sum of $500. Y is the:

Accepted Answer

In a negotiable instrument where one party (X) orders another party (Y) to pay a third party (Z) a certain sum, Y is referred to as the drawee, the party directed to pay the money.

Question 14

A draft is payable "to the order of Joe Jones or to bearer." Sally finds it and demands payment. Should the drawer pay Sally?

Accepted Answer

The draft is payable to either Joe Jones or the bearer because of the use of "or" in the instrument. This means that whoever is in possession of the draft (in this case, Sally, as the bearer) can demand payment.

Question 15

A promise or order is unconditional if it states that:

Accepted Answer

A promise or order is considered unconditional if it is stated to be absolute and not subject to any contingencies, conditions, or qualifications. This means that the fulfillment of the promise or order does not depend on any external factors or conditions being met.

Question 16

The court in Cooperative Centrale Raiffeisen-Boerenleenbank B.A. v. Bailey found:

Accepted Answer

Negotiability of an instrument under the Uniform Commercial Code (UCC) is determined by the terms of the instrument itself and the requirements set forth in the UCC, without regard to the subjective intent of the parties.

Question 17

A definite time required for negotiability would NOT be satisfied in which instance?

Accepted Answer

For a financial instrument to be negotiable, it must have a fixed date or be payable upon demand. Option B, "Payable one year from the completion of the building," does not satisfy the requirement for a definite time because the completion date of the building is uncertain.

Question 18

Elmore purchases goods from Grady, and Elmore executes and delivers a negotiable note to Grady for $1,200, payable to Grady's order in 30 days. Two weeks later, Grady negotiates the note to McDaniel. Which of the following is true?

Accepted Answer

C) Whether Elmore's defense is available against McDaniel will depend on whether McDaniel acquired the note in good faith and for value, had no knowledge of the defense, and took the note without reason to question its authenticity. This is because the rights of a holder in due course (which McDaniel may be if he meets the criteria) can be superior to those of the original parties, allowing the holder to enforce the note despite defenses that could have been raised against the original payee.

Question 19

Would an instrument containing the following language be negotiable? "Harold T. Stone, as President, hereby promises to pay $12,348 to the order of Joe Jones Furniture for office equipment for Redtyn Corporation, payable from its corporate assets. (Signed) Harold T. Stone as President, Redtyn Corporation."

Accepted Answer

The answer of Would an instrument containing the following language...

Question 20

In the development of the law of negotiable instruments, which of the following was not a step?

Accepted Answer

The law of assignments traditionally holds that assignees cannot obtain greater rights than their assignors had. This principle ensures that the transfer of a contractual right does not unfairly disadvantage the obligor.

Quiz 24: Form and Content