Question 1

On June 1,Rituparna bought a widget from Joel.The price was $75 000.On that same day,she gave him a bill of exchange for that amount that was drawn on the Bank of Brandon.Which of the following statements is TRUE?

Accepted Answer

A bill of exchange can have a due date that is different from the date it is issued, so June 1 is not necessarily the due date.

Question 2

Fenna created a promissory note for $10 000 that was payable to the order of Mark.She delivered that instrument to him.Mark is indebted to Muriel for $10 000.He wants to discharge that debt by allowing Muriel to receive payment under the note that Fenna created.Muriel is unsure whether Fenna or Mark would be capable of actually paying $10 000 if asked to do so.However,Muriel is confident that Mark's brother,Cameron,is capable of paying $10 000.Which of the following statements is TRUE?

Accepted Answer

Muriel's wishes can be satisfied by Mark endorsing the note to Muriel (special endorsement) and Cameron providing an accommodation endorsement, which guarantees payment.

Question 3

Which of the following statements is TRUE with respect to notice of dishonour?

Accepted Answer

Notice of dishonour is a formal notice given to the drawer and endorsers of a cheque that the cheque has been dishonoured by the bank. The purpose of notice of dishonour is to hold parties liable and to enable the parties to take necessary actions. In some circumstances, an endorser may be held liable even if it did not actually receive notice of dishonour following the dishonour of a cheque. Therefore, option B is the correct answer. The other options are incorrect because notice of dishonour needs to be provided to all parties, not just to a party that did not endorse an instrument, it does not relieve the drawee of liability, it is not automatically effective against all prior endorsers, and notice of dishonour needs to be provided within a reasonable time after the dishonour of the cheque, not within six months.

Question 4

On January 1,Jasmine bought a speedboat from Malcolm.The purchase price was $100 000.Jasmine gave Malcolm a promissory note for $100 000.The note was payable in five monthly instalments beginning on March 1.Which of the following statements is TRUE?

Accepted Answer

A promissory note is a written promise to pay a certain sum of money at a certain time. It must be for a "sum certain," which means that the amount of money to be paid must be clear and unambiguous. The note may also include an acceleration clause, which allows the holder of the note to demand payment of the entire amount if the maker defaults on any installment payment. A promissory note does not require a drawee, which is a person or entity that is ordered to pay the money. After each installment payment, the maker of the note should make sure that the holder of the note writes a receipt onto the note itself. This will provide evidence of the payment and help to avoid any disputes later on.

Question 5

Raj owed $5000 to Monica.In payment of that debt,he gave her a cheque for that amount that was drawn on his account at the Bank of Regina.In fact,his account only held $3000 worth of credits.Which of the following statements is TRUE?

Accepted Answer

Raj has effectively asked the Bank for a loan which may or may not be granted. Since Raj's account only holds $3000 worth of credits and he has written a cheque for $5000, he is effectively asking the Bank for a loan of $2000. The Bank may or may not grant this loan depending on Raj's credit history and other factors.

Question 6

Ismail used a cheque to pay for a widget that he bought from Maria.Maria delivered the cheque to Geoff Gagne after writing her signature and the following words on the back of it: "To Geoff Gagne if he builds a gazebo in my backyard." After he acquired the cheque,Geoff wrote his signature and the following words on the back of it: "For deposit only." Which of the following statements is TRUE?

Accepted Answer

The cheque contains a conditional endorsement by Maria ("To Geoff Gagne if he builds a gazebo in my backyard") and a restrictive endorsement by Geoff ("For deposit only").

Question 7

Natalia has a chequing account at the Bank of Victoria.It contains a balance of $3000.Natalia bought a scooter from Edgar for $1000.He wants to have a cheque in bearer form.That desire can be achieved if

Accepted Answer

Natalia can make a cheque payable to Edgar for $1000 and he can then put a blank endorsement on the back of it, making it a bearer cheque. This is the safest and most appropriate option for both parties involved. The other options either involve potential risks, such as fraud or legal issues, or are not feasible in this situation.

Question 8

Which of the following statements is TRUE with respect to certification of cheques?

Accepted Answer

When a cheque is certified, the bank sets aside the necessary funds to ensure that the cheque can be honoured. This means that even if the account is overdrawn, the payee can still receive payment. The other statements are not true. A certified cheque is usually requested by the drawer of the cheque, the process of certification is not based on a detailed set of provisions in the Bills of Exchange Act, banks do not transfer funds to a countermand account after certifying a cheque, and the decision to countermand a cheque can be made by the drawer.

Question 9

On May 1,Emile bought a widget from Megan.The price was $15 000.On June 1,Emile paid that price by giving Megan a bill of exchange that was drawn on the Bank of Swift Current.The bill was stated to be payable "on demand." Which of the following statements is TRUE?

Accepted Answer

A bill of exchange payable "on demand" means it can be presented for payment at any time, and the holder is entitled to receive the amount immediately upon presentation.

Question 10

Patrick bought a widget from Ishani.The purchase price was $25 000.He paid by giving her a cheque for that amount that was drawn on his account at the Bank of Fundy.The cheque was made payable to Ishani.By coincidence,Ishani owes $25 000 to XYZ Inc.Which of the following statements is TRUE?

Accepted Answer

The answer of Patrick bought a widget from Ishani.The purchase...

Question 11

Wallace bought a widget from Sabrina.The price was $7500.When he collected the widget from her warehouse,he gave her a cheque that was drawn on his account at the Bank of Windsor.When he got the widget home,however,he discovered that it was defective.He therefore went to his bank and placed a stop payment order on the cheque.Which of the following statements is TRUE?

Accepted Answer

By placing a stop payment order on the cheque, Wallace revoked the authority of the Bank of Windsor to debit his account. Therefore, the cheque cannot be honored even if Sabrina presents it for payment.

Question 12

On February 1,Patricia bought a guitar from Metheny's Music Shop.The price was $2500.She gave the store a cheque for that amount that was dated June 1.Which of the following statements is TRUE?

Accepted Answer

A postdated cheque is one that is dated for a future date. In this case, Patricia has given a postdated cheque that cannot be honored before June 1. If the store presents the cheque for payment before that date, it will not be honored by the bank. Therefore, option E is the correct answer.

Question 13

Which of the following types of endorsements can you place upon a negotiable instrument without creating any risk of liability for yourself?

Accepted Answer

The answer of Which of the following types of endorsements...

Question 14

Alice bought a boat from Brian.The purchase price was $250 000.On February 1,she paid that price by giving him a bill of exchange drawn on her account at the Bank of Kenora.The bill was due on December 31 and it was payable to Brian.On March 1,Brian negotiated the bill to Carla.On April 1,the Bank of Kenora accepted the bill at Carla's request.On May 1,Carla placed a blank endorsement on the bill and negotiated it to Dave.On June 1,Dave negotiated the bill to Edna.Every attempt at negotiation was successful.Which of the following statements is TRUE?

Accepted Answer

The answer of Alice bought a boat from Brian.The purchase...

Question 15

Scott bought a widget from Gowhara.The price was $10 000.He paid with a cheque that he had drawn on his account at the Bank of Kamloops.Scott had the cheque certified before he gave it to Gowhara.In fact,Scott's account balance was only $8000.When he discovered that fact,he went to the bank and gave instructions to have the cheque countermanded but the bank refused that request.Which of the following statements is TRUE?

Accepted Answer

The Bank of Kamloops is required to pay Gowhara $10 000. When a cheque is certified, the bank becomes responsible for paying the full amount of the cheque, regardless of the account balance. Once certified, the bank cannot usually refuse to honour the cheque, unless there is evidence of fraud or forgery. Scott's account balance being less than the cheque amount does not affect the bank's obligation to pay.

Question 16

Ranjit currently has possession of a cheque that was created by Maura.Although Maura created that cheque on January 1,the instrument is dated June 1.The cheque originally was payable to Nora.The cheque now bears endorsements by Nora and Shelley.Maura,Nora,Shelley,and Ranjit are the only parties that have dealt with the cheque.Which of the following statements is TRUE?

Accepted Answer

According to the given scenario, Ranjit can be a holder in due course even if he did not personally provide consideration to anyone. This is because there is no requirement that the holder must be a purchaser for value under the Uniform Commercial Code (UCC). As long as Ranjit did not have any knowledge of any defects or irregularities with the cheque and obtained it in good faith, he can be considered a holder in due course.

Question 17

Which of the following statements is TRUE with respect to bills of exchange?

Accepted Answer

Unlike a cheque, which must be drawn on a bank, a bill of exchange may be drawn on a bank or anyone else. A bill of exchange is a negotiable instrument used in international trade or commerce. It is a written order by the drawer to the drawee to pay a certain sum of money on a specified date to the payee. Once the drawee accepts the bill of exchange, he becomes liable to make payment on the specified date. The drawer becomes the payee, and the payee becomes the holder of the bill.

Question 18

Jacob bought a widget from Erin for $15 000.In payment,he gave her a cheque that was payable to her.The cheque was drawn on his account at the Bank of Kitchener.Erin signed her name on the back of the cheque and delivered it to Arthur in order to discharge a debt that she owed to him.Arthur presented the instrument to the Bank of Kitchener for payment,but was refused payment because the balance for Jacob's account was only $8000.Which of the following statements is TRUE?

Accepted Answer

Since Jacob gave Erin a cheque payable to her, it suggests that Erin had the right to negotiate the instrument to Arthur. However, since the cheque was dishonoured, Arthur may be able to sue both Jacob and Erin for breach of contract. The fact that Jacob's account balance was only $8000 means that he did not have sufficient funds to cover the widget he bought from Erin, which can expose him to legal liability. Additionally, if the widget was defective, it may also give rise to a cause of action against Erin, who sold it to Jacob. Therefore, option E is the best choice.

Question 19

Which of the following statements is TRUE with respect to promissory notes?

Accepted Answer

A promissory note usually includes a promise to pay a certain amount of money by the maker to the payee, along with any applicable interest. It does not necessarily involve three parties or require payment in instalments. However, it does require consideration to be enforceable.

Question 20

Claire gave a cheque for $5000 to Antonio.Which of the following statements is TRUE?

Accepted Answer

Claire has created a bill of exchange by giving a cheque, which is a type of negotiable instrument drawn upon a bank. Antonio can only acquire rights against Claire if her bank accepts the cheque. Therefore, option D is also partially correct, but option B is a more accurate response. Option A is incorrect as a promissory note is a different type of negotiable instrument, and option C is incorrect as consideration is required to create a legally enforceable agreement. Option E is also incorrect as Antonio cannot directly enforce rights against the drawee unless the cheque is accepted.

Quiz 14: Special Contracts: Negotiable Instruments