Question 1

A currency or cash substitution is a relatively new development in the law arising in the 20^th century.

Accepted Answer

A currency or cash substitute has existed for centuries in Anglo-American law, predating much of the common law.

Question 2

All negotiable documents may be in electronic format.

Accepted Answer

The very nature of electronically sent information means that certain types of negotiable instruments should not be in a virtual format.

Question 3

Which of the following was the ruling of the court in the Case Opener regarding the gambler who wrote bad checks to a casino to purchase markers and then tried to avoid payment on the basis of an oral agreement by which a casino host told the gambler that he already had sufficient remaining casino credit to receive the markers?

Accepted Answer

The court held that the potential oral agreement was irrelevant to the negotiability of the checks. The checks were negotiable, and the casino was a holder of the instruments.

Question 4

The words "pay to cash" are sufficient words of negotiability.

Accepted Answer

Wordings such as "Pay to bearer," "Pay to Ichiro Endo or bearer," "Pay to cash," and "Pay to the order of cash [or bearer]" all make the paper negotiable.

Question 5

Which of the following is true regarding negotiable instruments in the European Union?

Accepted Answer

If a transaction is defined as a negotiable instrument within a certain country, it must conform to certain general characteristics outlined by the EEC. These general characteristics are intended to dilute the complexities of cross-border transactions.

Question 6

The law does not permit an oral negotiable instrument.

Accepted Answer

The law does not permit an oral negotiable instrument.

Question 7

Which of the following is a written document containing the signature of the creator that makes an unconditional promise or order to pay a sum certain in money at either a time certain or on demand?

Accepted Answer

A negotiable instrument, is a written document containing the signature of the creator that makes an unconditional promise or order to pay a certain sum of money, either at a specified time or on demand.

Question 8

A note is a promise,by the maker of the note,to pay a payee.

Accepted Answer

A note is a promise, by the maker of the note, to pay a payee [UCC 3-103(a)(9)].

Question 9

Which of the following is true if an instrument fails to qualify as a negotiable instrument?

Accepted Answer

If an instrument fails to qualify as a negotiable instrument, that does not mean it fails to be a perfectly good and enforceable contract. All it means is that the special rules regarding negotiable instruments do not apply.

Question 10

Which of the following is known as a substitute for cash?

Accepted Answer

A substitute for cash, or a negotiable instrument, is a written document containing the signature of the creator that makes an unconditional promise or order to pay a certain sum of money, either at a specified time or on demand.

Question 11

A draft is an order by a drawer to a drawee to pay a payee.

Accepted Answer

A draft is an order by a drawer to a drawee to pay a payee [UCC 3-103(a)(6)].

Question 12

If an instrument fails to qualify as a negotiable instrument,that means that the instrument fails to be an enforceable contract.

Accepted Answer

If an instrument fails to qualify as a negotiable instrument, that does not mean it fails to be a perfectly good and enforceable contract. All it means is that the special rules regarding negotiable instruments do not apply.

Question 13

Which of the following is true regarding payment on a time instrument?

Accepted Answer

Payment on a time instrument can be made only at a specific future time, which the UCC says must be easily determined from the document itself [3-108(b)].

Question 14

Even the mention of another document in an instrument prevents the instrument from being negotiable.

Accepted Answer

Merely mentioning another document does not make a promise or order conditional. A promise or order becomes conditional only if the other document directly creates a situation under which the promise or order may not be honored.

Question 15

Suzanne arranged with ABC Bank for a revolving line of credit up to $50,000 for her antique shop.The bank also required that she provide a promissory note promising payment of $50,000 to the bank or as much as may be outstanding in amounts owed to the bank payable on demand.The note allowed for partial early prepayment and for interest after default.A few months later,although Suzanne was not in default,the bank canceled the line of credit and demanded payment of all amounts due based on the promissory note.If the reasoning of the case in the text Reger Development,LLC v.National City Bank is followed,which of the following is the most likely result of the dispute between Suzanne and ABC Bank?

Accepted Answer

The court in Reger Development, LLC v. National City Bank recognized that the duty to act in good faith does not apply to lenders seeking payment on demand notes. The court further recognized that language regarding the right to prepayment referenced the bank's right to collect scheduled monthly interest payments and did not deviate from the structure of a demand note.

Question 16

Which of the following is true regarding negotiation of an instrument?

Accepted Answer

Negotiation of an order instrument is by endorsement plus delivery, while negotiation of a bearer instrument is by delivery alone.

Question 17

Which of the following was the result in Samuel James Thompson v.First Citizens Bank & Trust Co.,the case in the text in which the parties disagreed as to whether an instrument referenced as a certificate of deposit was actually negotiable?

Accepted Answer

According to the court "In the instant case, the CD confirmation clearly states, in upper case type, "NON-TRANSFERABLE." We conclude that this qualifies as "a conspicuous statement . . . that the promise or order is not negotiable," and, thus, that the CD does not fall within the purview of the negotiable instrument provisions of the UCC."

Question 18

A negotiable instrument must be a conditional order to pay.

Accepted Answer

A negotiable instrument, is a written document containing the signature of the creator that makes an unconditional promise or order to pay a certain sum of money, either at a specified time or on demand.

Question 19

In order to satisfy the requirement of negotiability that payment be at a time certain or on demand,acceleration of payment is not allowable.

Accepted Answer

An instrument that permits acceleration of payment does not violate the requirement that for negotiability an instrument be payable at a time certain or on demand as long as there is a fixed date of payment if the acceleration clause is not satisfied.

Question 20

An automated signature satisfies the UCC requirement that the signature of the creator appear in order for an instrument to be negotiable.

Accepted Answer

Automated signatures, created by stamp or machine, satisfy the writing requirement of the UCC for negotiability.

Quiz 26: Negotiable Instruments: Negotiability and Transferability

A currency or cash substitution is a relatively new development in the law arising in the 20th century.

All negotiable documents may be in electronic format.

The words "pay to cash" are sufficient words of negotiability.

Which of the following is true regarding negotiable instruments in the European Union?

The law does not permit an oral negotiable instrument.

Which of the following is a written document containing the signature of the creator that makes an unconditional promise or order to pay a sum certain in money at either a time certain or on demand?

A note is a promise,by the maker of the note,to pay a payee.

Which of the following is true if an instrument fails to qualify as a negotiable instrument?

Which of the following is known as a substitute for cash?

A draft is an order by a drawer to a drawee to pay a payee.

If an instrument fails to qualify as a negotiable instrument,that means that the instrument fails to be an enforceable contract.

Which of the following is true regarding payment on a time instrument?

Even the mention of another document in an instrument prevents the instrument from being negotiable.

Which of the following is true regarding negotiation of an instrument?

Which of the following was the result in Samuel James Thompson v.First Citizens Bank & Trust Co.,the case in the text in which the parties disagreed as to whether an instrument referenced as a certificate of deposit was actually negotiable?

A negotiable instrument must be a conditional order to pay.

In order to satisfy the requirement of negotiability that payment be at a time certain or on demand,acceleration of payment is not allowable.

An automated signature satisfies the UCC requirement that the signature of the creator appear in order for an instrument to be negotiable.

A currency or cash substitution is a relatively new development in the law arising in the 20^th century.