Question 1

The party who issues or creates a document that requests payment, probably from a bank, is called the drawer.

Accepted Answer

The drawer is the party who issues or creates a document that requests payment, probably from a bank.

Question 2

The drawer owes money to the drawee in a negotiable instrument.

Accepted Answer

The drawer is the one who issues the negotiable instrument (such as a check or promissory note) and makes the promise to pay, while the drawee is the one who will receive the payment. Therefore, the drawer wouldn't owe money to the drawee in a negotiable instrument.

Question 3

When real estate is used to back up a note, it is called a collateral note.

Accepted Answer

A note backed by real estate is typically called a mortgage note or a deed of trust, not a collateral note.

Question 4

Orders to pay include notes and certificates of deposit.

Accepted Answer

The answer of Orders to pay include notes and certificates...

Question 5

Promises to pay include notes and certificates of deposit.

Accepted Answer

Promises to pay can include notes and certificates of deposit, so the statement is true.

Question 6

Under Article 3 of the UCC, a note is 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 time in the future.

Accepted Answer

This statement accurately summarizes the definition of a note according to Article 3 of the UCC.

Question 7

Under Article 3 of the UCC, a check is an unconditional written order to pay that involves three parties in distinct capacities: drawer, drawee, and payee. The drawee must be a bank. Payment must be "on demand."

Accepted Answer

This is a correct statement of the requirements for a check under Article 3 of the UCC.

Question 8

A check is a draft drawn on a bank and payable on demand.

Accepted Answer

A check is a type of draft that is payable on demand and drawn on a bank.

Question 9

The party who agrees to make a payment to another party, based on a document presented to it, such as a bank, is called the drawer.

Accepted Answer

The party who agrees to make a payment based on a document presented to it is called the drawee, not the drawer. The drawer is the party who creates and signs the document, such as a check or bill of exchange.

Question 10

Promises to pay include drafts and checks.

Accepted Answer

The answer of Promises to pay include drafts and checks....

Question 11

A note involves two parties, the maker and the payee. Payment must be on demand.

Accepted Answer

A note can specify payment on demand or at a definite time. It does not have to be on demand only.

Question 12

Orders to pay include drafts and checks.

Accepted Answer

Orders to pay refer to any document that directs a financial institution to pay a specific amount of money to a designated recipient or payee. Drafts and checks are both considered orders to pay.

Question 13

When the maker of a note promises to repay the note at specific dates over time, it is called an installment note.

Accepted Answer

An installment note is a type of promissory note where the borrower agrees to make a series of payments to the lender at set intervals (usually monthly) until the entire loan is repaid.

Question 14

A cashier's check is a form of check in which the bank is both the drawer and the drawee.

Accepted Answer

A cashier's check is drawn on the bank's own funds, so the bank is both the drawer and the drawee.

Question 15

When personal property is used to back up a note, it is called a collateral note.

Accepted Answer

When personal property is used as security or collateral for a loan, the resulting promissory note is called a collateral note.

Question 16

The party to receive a payment from a negotiable instrument is called the payee.

Accepted Answer

The payee is the party who is to receive the payment from a negotiable instrument such as a check, promissory note, or bill of exchange.

Question 17

The party who issues or creates a document that requests payment, probably from a bank, is called the drawee.

Accepted Answer

The party who issues or creates a document that requests payment is called the drawer, while the party who is requested to make payment is called the drawee, usually a bank.

Question 18

The drawee owes money to the drawer in a negotiable instrument.

Accepted Answer

The drawee is the person or entity that owes the money to the drawer in a negotiable instrument such as a check or promissory note.

Question 19

For a check, the bank is the drawee.

Accepted Answer

The drawee is the bank upon which the check is drawn, and it is the one that pays the amount of the check when it is presented for payment.

Question 20

The party who agrees to make a payment to another party, based on a document presented to it, such as a bank, is called the drawee.

Accepted Answer

This is correct. The drawee is the party who is obligated to make a payment based on a document presented to it, such as a bank paying on a check presented to it.

Quiz 13: Negotiable Instruments, Credit, and Bankruptcy