Question 1

In a sales contract,how can the buyer make payment?

Accepted Answer

In a sales contract,the buyer can make payment through cash,credit arrangements,and negotiable instruments.

Question 2

When a depositary bank receives a check,it must present the check at the payor bank and cannot send it through intermediary banks to reach the payor bank.

Accepted Answer

When a depositary bank receives a check,it must present the check at the payor bank or send it through intermediary banks to reach the payor bank.

Question 3

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 is called a ________.

Accepted Answer

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

Question 4

An instrument "payable on demand" is one that ________.

Accepted Answer

According to Uniform Commercial Code Section 3-108(a),an instrument that is "payable on demand" is one that "(i)states that it is payable on demand or at sight,or otherwise indicates that it is payable at the will of the holder; or (ii)does not state any time of payment."

Question 5

Which of the following is an incorrect statement regarding the requirements for an instrument to be negotiable?

Accepted Answer

According to Section 3-104(a)of the Uniform Commercial Code,in order for an instrument to be negotiable,payment is to be made either on demand or at a fixed future time (a time certain).

Question 6

Check 21 allows banks to forgo sending original checks as part of the collection or return process and instead send a truncated version.

Accepted Answer

To help facilitate electronic presentment,in 2004 the United States Congress passed the Check Clearing for the 21st Century Act (also known as Check 21 or the Check Truncation Act).Check 21 allows banks to forgo sending original checks as part of the collection or return process and instead send a truncated version.In place of the original paper check,a bank may send: a)a substitute check; or b)by agreement,an electronic image of the check along with data from the magnetic ink character recognition (MICR)line on the original check.

Question 7

A customer issues a stop-payment order when she has issued a check that has not yet been accepted and she wants the check to be accepted.

Accepted Answer

A customer can issue a stop-payment order,an order by a drawer that instructs the drawee bank not to pay a check that has been drawn on the customer's account.A customer issues a stop-payment order when she has issued a check that has not yet been accepted and she wants the check not to be accepted.

Question 8

An order by a drawer to a drawee to pay a payee is known as a ________.

Accepted Answer

According to Uniform Commercial Code Section 3-103(a)(6),a draft is an order by a drawer to a drawee to pay a payee.

Question 9

With a(n)________ instrument,payment can be made only at a specific time designated in the future.

Accepted Answer

With a time instrument,payment can be made only at a specific time designated in the future.

Question 10

According to the Uniform Commercial Code,money orders are considered promissory notes.

Accepted Answer

According to Uniform Commercial Code Section 3-104,money orders,particularly personal money orders,are usually in the same form as personal checks and are considered checks.A check is a special kind of draft.A draft is an instrument that is an order.

Question 11

The Uniform Commercial Code prohibits bank customers from postdating checks.

Accepted Answer

According to Uniform Commercial Code Section 4-401(c),customers can postdate checks but they must give the bank notice of the postdated check.Therefore,a bank can assume that it can pay all checks on presentment unless the bank has received notice to the contrary.

Question 12

Which of the following is a substitute for cash?

Accepted Answer

A negotiable instrument is a substitute for cash.

Question 13

The Uniform Commercial Code requires a bank to certify a check if the customer has sufficient funds in his or her account.

Accepted Answer

According to Uniform Commercial Code Section 3-409(d),banks are not required to certify checks.If a bank refuses to certify a check,the check is not considered dishonored; it merely lacks the extra protection of certification.

Question 14

A promise made by a bank to pay a payee a certain amount of money at a future time is called a ________.

Accepted Answer

A certificate of deposit is a promise made by a bank to pay a payee a certain amount of money at a future time.

Question 15

An accord is an additional piece of paper with endorsements that is firmly attached to the negotiable instrument.

Accepted Answer

Normally,there is a place on the negotiable instrument for endorsements,such as on the back of a check.If there is no room on the instrument or if all the room has been taken by previous endorsements,an allonge must attached.An allonge is simply an additional piece of paper with the endorsements.It must be firmly attached (for example,stapled)to the negotiable instrument.

Question 16

Which of the following are examples of negotiable instruments?

Accepted Answer

Uniform Commercial Code Section 3-104 recognizes four specific types of negotiable instruments: notes,certificates of deposits (a highly specialized type of note),drafts,and checks,(a highly specialized type of draft).

Question 17

According to the Uniform Commercial Code,a check is a special kind of note.

Accepted Answer

According to the Uniform Commercial Code,a check is a special kind of draft.A draft is an instrument that is an order.

Question 18

In the check collection process,the depositary bank cannot also be the payor bank.

Accepted Answer

In the check collection process,sometimes the depositary bank is the same bank as the payor bank.When this is the case,the check is referred to as an "on-us" item.

Question 19

With a(n)________ instrument,the payee or subsequent holder can demand actual payment at any time.

Accepted Answer

With a demand instrument,the payee (or subsequent holder)can demand actual payment at any time.

Question 20

A certificate of deposit is a ________ of the bank.

Accepted Answer

According to Uniform Commercial Code Section 3-104(j),a certificate of deposit is a note of the bank.

Quiz 17: Negotiable Instruments: Negotiability and Transferability