Question 1

Dina drew a cheque on her account at the Bank of Brockville and named Gary as the payee.What process could be used to make the cheque into "something equivalent to money"? Explain the nature and effect of that process.

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Question 2

What is an "acceleration clause"? When and why is such a clause inserted into a negotiable instrument?

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Question 3

Identify and briefly explain three major differences between a negotiable instrument and a regular contract.

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Question 4

Francine bought a widget from Simon.In payment of the purchase price,she gave him a cheque for $10 000 drawn on her account at the Bank of Waterloo.Because Francine's account was overdrawn,the bank dishonoured the cheque when Simon presented it for payment.Identify two grounds upon which Simon can sue Francine.Briefly explain which option is easier.

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The answer of Francine bought a widget from Simon.In payment...

Question 5

Krystyne bought a widget from Ryan.As payment,she gave him a cheque for $10 000 that was drawn on her account at the Bank of Windsor.Because she discovered that the widget was defective,Krystyne countermanded her cheque before Ryan presented it for payment.Due to a clerical error,the bank nevertheless honoured the cheque and paid $10 000 to Ryan.Is the bank entitled to debit Krystyne's account? Do you have enough information to answer that question?

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Question 6

The Bills of Exchange Act and the Sale of Goods Act both arose as codifications of judge-made rules.Furthermore,the original legislation in each case was intended to increase certainty and efficiency in the commercial world.There is,however,a major difference between the two statutes.One generally provides default rules that the parties are free to accept or reject.The other does not allow the parties to freely opt in and out of its sections.Which of the two statutes is less flexible and why?

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Question 7

Milosz is the holder in due course of a cheque that has been negotiated several times.Identify a situation in which he may be subject to the equities if he seeks to enforce the instrument against the drawer.

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Question 8

When writing a cheque made out to Austin,Walter left visible spaces between the numbers when he wrote them down.As a result,Austin added an extra 7 in between two of the numbers on the cheque costing Walter $7000 more than he intended to be withdrawn from his chequing account.Which of the following is true?

Accepted Answer

Since the alteration was caused by Walter's carelessness, the bank is entitled to take the extra $7000 from the account.

Question 9

Briefly compare and contrast a postdated cheque and a staledated cheque.Can a cheque ever become both postdated and staledated?

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Question 10

Bob signs his name on the back of a cheque he is receiving,indicating a special endorsement to Charles.However,assuming Charles and Bob have never met and do not know one another,Charles is reluctant to purchase that cheque from Bob.If a third party became involved to help bring assurance to the transaction,which of the following statements would most likely be written by the third party?

Accepted Answer

Bob hereby identified is the most likely statement to be written by the third party to help bring assurance to the transaction. This is because it identifies Bob as the person who signed the cheque, which would help to assure Charles that the cheque is valid and that Bob is the rightful owner of the cheque.

Question 11

Identify two types of endorsements that may be used by a person who is not the holder of a negotiable instrument.Provide an example of each.

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Question 12

What is the difference between a demand draft,a sight draft,and a time draft?

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Question 13

Jordan bought a widget from Sara.He paid the purchase price of $25 000 by giving her a cheque drawn upon his account at the Bank of Saskatoon.The facts involve three contracts.Identify those contracts and briefly explain the rights that each involves.

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Question 14

Shauna drew a cheque on her account at the Bank of Whitehorse.That cheque passed through several people before Kyle acquired possession of it.Because Shauna's account was overdrawn,the Bank of Whitehorse dishonoured the cheque when Kyle presented it for payment.Kyle realizes that there is no point in suing Shauna because she simply does not have any money.Is there anyone else to whom Kyle can look for payment? Do you require any additional information in order to fully answer this question?

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The answer of Shauna drew a cheque on her account...

Question 15

Chris fraudulently induced Lucianna into drawing a cheque for $10 000.Chris then negotiated the cheque to Kenneth,who is a holder in due course.Is Kenneth entitled to receive payment on the cheque? Do you need any more information before answering that question? Explain your answer.

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Question 16

Although you agreed to sell a widget to me,you are concerned about actually receiving payment.Discuss the main advantages and disadvantages of receiving payment from me in the form of cash or a simple cheque.

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Question 17

Maxim received a cheque that was specially endorsed to him under several conditions.Alexa then acquired that same cheque from Maxim under the same conditions,and Tori then acquired it from Alexa with those same conditions.Albert was the last and final person to acquire the cheque which he received from Tori with the same conditions attached.If none of the individuals listed above were involved with fraudulent or illegal activity,which of them other than Maxim were holders in due course?

Accepted Answer

Alexa, Tori and Albert all acquired the cheque with the same conditions attached and none of them were involved in fraudulent or illegal activities. Therefore, they all qualify as holders in due course. Maxim cannot be a holder in due course as he was the one who received the cheque originally and therefore knew of any conditions attached to it.

Question 18

You are the manager of the York Trust Company.Nadia,one of the company's customers,has drawn a bill of exchange upon her account with the company.That bill is for $50 000 and it names Seth as the payee.The bill is due on August 31.On June 1,Seth appears at your office seeking acceptance of the bill.Describe the process and effect of acceptance.As a matter of risk management,what special precaution should you exercise if you decide to accept the bill on behalf of the trust company?

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The answer of You are the manager of the York...

Quiz 14: Special Contracts: Negotiable Instruments