NEGOTIABLE INSTRUMENTS
1. Notice of dishonor is not required to be given by a drawer when:
a. The drawer and the drawee are the same person
b. the drawee has countermanded payment
c. the drawee is fictitious
d. all of the above
2. Which of the following is not considered material alternation
a. changing the date
b. changing the amount
c. changing the relation of the parties
d. none of them
3. A negotiable instrument is discharged by:
a. payment in due course by or on behalf of the party primarily liable
b. payment in due course by the party accommodated
c. intentional cancellation thereof by the holder
d. none of them
4. Who of the following is party with primary liability?
a. Maker c. drawer
b. Indorser d. person negotiating by mere delivery
5. A check is not presented for payment within a reasonable length of time after issue is
called
a. certified c. memorandum
b. Stale d. crossed
6. Signification by the drawee of his assent to comply with the order of the drawer is:
a. Indorsement c acceptance
b. delivery d. presentment for acceptance
7. Presentment for acceptance is required when
a. the bill is payable after sight
b. the bill requires it
c. the bill is drawn payable elsewhere than the residence of the drawee
d. all of them
8. Protest is required when this bill is dishonored:
a. domestic/local c. trade acceptance
b. foreign d. all of the above
9. The following are promissory notes except:
a. due bill c. certificate of deposit
b. bond d. none of them
10. Which of the following is false?
a. the acceptor is primarily liable
b. the drawer is secondarily liable
c. the issue is not negotiation
d. when the drawer and drawee are the same person the holder consider the bill was a
note
11. I promise to pay Jose Reyes or order P 10,000 ten days after the date signed by M as maker.
The note is undated. Which of the following is correct?
a. the note is non-negotiable
b. the payee can require payment 10 days after issue
c. the payee can require payment at any time
d. the payee cannot negotiate the note
12. The negotiable promissory note signed by M as maker for P 10,000 is payable to Jose Cruz
or bearer on May 10, 2009. M however issued the note to the payee May 15, 2009. In this
case:
a. The instrument is considered non-negotiable because the date of issue is later than the
date of payment.
b. Cruz can ask for payment at anytime
c. Cruz can require payments only on May 15, 2009
d. Cruz cannot negotiate the note
13. “Pay to Maria or order P 20,000 upon demand”, signed by A as drawer and addressed to
B. Maria negotiated the bill to C, C to D, E stole the bill from D and indorsed it to F by
forging the signature of D. F in turn indorsed the bill to G & G to H. Which of the following
is false?
a. all indorsers prior to the forgery are discharged
b. the drawer is liable to H
c. F is liable to H
d. Forgery is real defense
14. M is the maker of a note payable to J. Cruz or order for P 5,000 due July 30, 2009. Cruz
borrowed P 2,000 from C payable July 31, 2009 and pledged the note by indorsing it to C.
Which of the following is correct?
a. a promissory note cannot be pledged without the consent of the maker
b. On July 30, 2009 C can collect from M only P 2,000
c. on July 30, 2009 C can collect from M P 5,000
d. partial indorsement is allowed
15. A is the drawer of a bill addressed to B, payable to C or order 10 days after acceptance for
P 8,000. C negotiated the bill to D, to E and E to F. The bill was accepted by B when
presented by F. If the signature of A is forge, which of the following is false?
a. B is required to pay F even if the signature of A is a forgery
b. B is not required to pay F since he has the defense of forgery
c. Forgery is considered a real defense
d. If B dishonors the bill by non-payment F may give to any indorse
16. M is the maker of a note, payable to C or order for P 10,000. C negotiated the note to D,
D to E, E to F, F to G and G to H. M dishonored the note when presented by H for payment.
H gave notice of dishonor to F. Which of the following is true?
a. all indorsers prior to F are discharged
b. only G is discharged
c. H is required to notify M
d. F in turn can give notice to G
17. “ Pay to Pedro Reyes or order P 20,000 ten days after sight
SIGNED
By A drawer as agent of B
To: B
Pedro Reyes negotiated the bill to C, C to D and D to E. B dishonored the bill by non-
payment. E gave notice of dishonor to all prior parties except B. Which of the following is
not correct?
a. The drawer is not liable to E
b. The drawer is liable to E since he was duly notified of the dishonor
c. if D paid E , C becomes liable to D
d. this bill may be considered as a note
18. M signed a promissory note payable to C or order for P 5,000 ten days after date. C
indorsed the note to D, D to E and E to F. F, without authority from the prior parties, altered
the amount to P 15,000 then indorsed the note to G.
a. the unauthorized alteration renders the note void
b. G cannot require M to pay anything
c. G can require M to pay only P 5,000 if G is a holder in due course
d. G can require M to pay P 25,000 if G is a holder in due course
19. Drawer A addressed a bill to B for P 20,000 payable to C or order 20 days after acceptance.
B made a conditional acceptance in this case:
a. the bill becomes non-negotiable
b. it is still negotiable notwithstanding the conditional acceptance
c. the holder cannot refuse to take a conditional acceptance
d. B is considered a constructive acceptor
20. M is the maker of a note for P 30,000 payable to C or bearer. C negotiated the note to D,
D to E, E to F and F to M. Which is correct?
a. the note is discharged
b. the noted is not discharged since there is no payment
c. M cannot re-issued the note
d. The indorsers are not discharged
