Question 1

When a specific payee is named in an instrument, the instrument is known as a[n] _____ instrument.

Accepted Answer

A)   Demand
B)   Order
C)   Transactional
D)   Bearer
E)   PayorF) C) and E)
G) A) and E)

Question 2

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

Accepted Answer

A)   A negotiable instrument
B)   A nonnegotiable instrument
C)   A payable document
D)   A nonpayable document
E)   An endorsed payable documentF) C) and E)
G) A) and D)

Question 3

A certificate of deposit is a ______ of the bank.

Accepted Answer

A)   note
B)   draft
C)   novation
D)   check
E)   promissory contractF) A) and B)
G) A) and C)

Question 4

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

Accepted Answer

A)   If a transaction is defined as a negotiable instrument within a certain country, it must conform to certain general characteristics outlined by the European Economic Council.
B)   The European Economic Council adopted the UCC as the law in regard to negotiable instruments in all member countries of the European Union.
C)   The European Economic Council adopted the UCC as the law in regard to negotiable instruments in all member countries of the European Union unless a member country has specifically opted out.
D)   The European Economic Council suggests the UCC as the law in regard to negotiable instruments in all member countries of the European Union; but in order for it to be applicable, a member country must specifically affirm adoption of the UCC.
E)   Negotiable instruments are not recognized.F) C) and D)
G) B) and E)

Question 5

Under the UCC which of the following statements is sufficient to make a promise or order to pay conditional?

Accepted Answer

A)   "I promise to pay from the corporate account."
B)   "I promise to pay as per the contract for the sale of goods between the parties."
C)   "I promise to pay because I owe the money."
D)   "I promise to pay if the following occurs."
E)   "Borrower may pay without penalty all or a portion of the amount owed earlier than it is due."F) A) and B)
G) B) and C)

Question 6

What two characteristics must a written document have in order to satisfy the requirement that a negotiable instrument be in writing?

Accepted Answer

A)   (1)  relative permanence and (2)  a signature by both parties.
B)   (1)  a signature at the end by the party to be charged and (2)  movability.
C)   (1)  relative permanence and (2)  acknowledgement.
D)   (1)  movability and (2)  acknowledgement.
E)   (1)  relative permanence and (2)  movability.F) B) and E)
G) B) and C)

Question 7

"Book Payment." Molly and Pat signed a contract providing that "Pat will furnish the correct used business law book for use in Molly's business law class; and on August 15, 2013, Molly promises to pay Pat $50 for the book." Molly took the book and planned to pay Pat. Meanwhile, Pat properly assigned the contract Molly had signed to Jack. When Molly went to class, however, she discovered that the book was the incorrect book. When Jack asked Molly for payment, Molly refused. Molly told Jack that the book was useless to her and that she was not paying either him or Pat anything for it. Jack told Molly that he had an enforceable assignment in the form of a negotiable instrument and that he could collect regardless of whether the book was useless. Molly did not believe him. Since she was trying to save money on books, she also agreed to buy Tim's U.S. history book for $40. She had an oral agreement with Tim that he would give her the book and that she would pay him in three days. This time Molly got the right book. Tim, in writing, properly assigned the right to the $40 payment to Richard. Richard asked Molly for the money. Molly admitted her agreement with Tim but told Richard that she was not going to pay him because he did not have a negotiable instrument. Molly also purchased a communications book from Sam promising in writing to give him, to his order, a DVD she had in return the next day.
-Which of the following is true regarding Jack's claim that he had a negotiable instrument and could collect from Molly?

Accepted Answer

A)   Jack is correct.
B)   The agreement is not negotiable because it does not contain words of negotiability.
C)   The agreement is not negotiable because the book was the wrong book.
D)   The agreement is not negotiable because Jack was not a party to the original contract.
E)   The agreement is not negotiable both because the amount at issue is insufficient to create a negotiable instrument.F) C) and D)
G) D) and E)

Question 8

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

A)   The potential oral agreement as to the markers was irrelevant to the negotiability of the checks.
B)   The oral agreement was relevant to the negotiability of the checks, but it did not affect the gambler's liability on the checks.
C)   The oral agreement was relevant to the negotiability of the checks, and acted to excuse the gambler from liability on the checks.
D)   The oral agreement established that the checks were not negotiable instruments.
E)   The oral agreement established breach of contract; therefore, while another type of instrument would have been negotiable, the checks involved were not.F) B) and D)
G) None of the above

Question 9

Before Phil endorsed the check it was a[n] ______ instrument; and after he endorsed it, the check was a[n] _____ instrument.

Accepted Answer

A)   Order; order
B)   Order; transactional
C)   Order; bearer
D)   Transactional; bearer
E)   Bearer; bearerF) B) and E)
G) B) and C)

Question 10

What does the term "float" in banking reference?

Accepted Answer

A)   The time it takes for a check to go through the traditional check-clearing process and be paid.
B)   The time it takes for a bank authority to report a bad check to the issuing bank.
C)   The time it takes to convert a nonnegotiable instrument to a negotiable instrument.
D)   The time it takes to convert a time instrument to a demand instrument.
E)   The time it takes to convert a demand instrument to a time instrument.F) B) and D)
G) C) and D) A

Question 11

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

A)   Suzanne will prevail because she was current on payments, and the bank did not exercise good faith in calling the note.
B)   Suzanne will prevail because the reference to prepayment destroyed the note's negotiability.
C)   Suzanne will prevail because the reference to interest after default destroyed the note's negotiability.
D)   The bank will prevail because, although the note is not a negotiable instrument, the bank has an enforceable contract.
E)   The bank will win because it had the right to call for payment of the demand instrument.F) C) and D)
G) A) and E)

Question 12

All negotiable documents may be in electronic format.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true regarding simple contracts as compared to negotiable instruments?

Accepted Answer

A)   Simple contracts are assigned to an assignee, while negotiable instruments are negotiated to a holder.
B)   Simple contracts may be assigned to an assignee or negotiated to a holder while negotiable instrument may only be negotiated to a holder in due course.
C)   Simple contracts may be assigned to an assignee or negotiated to a holder while negotiable instrument may only be negotiated to a holder.
D)   Simple contracts may not be assigned while negotiable instruments may be negotiated to holder.
E)   Simple contracts may be assigned to a holder while negotiable instruments may not be assigned or negotiated.F) A) and E)
G) A) and D) A

Question 14

Which of the following is true when an instrument fails to meet the technical requirements necessary to qualify as a negotiable instrument?

Accepted Answer

A)   The instrument is still enforced as a negotiable instrument if it has been transferred to a holder in due course.
B)   The instrument is still enforced as a negotiable instrument if it has been accepted by a bank.
C)   The instrument is still enforced as a negotiable instrument if the holder can establish detrimental reliance based on a reasonable belief that the instrument qualified as a negotiable instrument.
D)   The instrument is may qualify as an enforceable contract.
E)   The instrument is null and void and of no use to the holder.F) A) and B)
G) None of the above

Question 15

Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

Accepted Answer

A)   The instrument states a specific date for payment.
B)   The instrument is dated and then states that "payment will be made 5 days after the above date."
C)   An instrument that states that payments is due at a fixed time but may be extended at the election of the holder.
D)   An instrument that states that "payment will be made 10 days after delivery of the goods."
E)   An instrument that permits acceleration of payment and has a fixed date of payment if the acceleration clause is not affected.F) None of the above
G) B) and D)

Question 16

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

Accepted Answer

A)   Time
B)   Demand
C)   Recourse
D)   Nonrecourse
E)   ImmediateF) B) and C)
G) A) and E)

Question 17

Anne orally promises Judy that in return for Judy washing Anne's dog, Anne unconditionally promises to pay Judy $50 the next Wednesday. Is a contract formed, is it negotiable, and why or why not?

Accepted Answer

It appears that a contract is formed bec...

Question 18

If an instrument is silent as to the time of payment, which of the following is assumed by the UCC?

Accepted Answer

A)   That it is a demand instrument
B)   That it is a time instrument
C)   That it is a void instrument
D)   That it is a voidable instrument
E)   That it is a nonnegotiable instrumentF) A) and E)
G) C) and D)

Question 19

Documents used as payments to facilitate commercial transactions were originally generically called ____.

Accepted Answer

A)   Negotiable instruments
B)   Commercial paper
C)   Promissory paper
D)   Commerce notes
E)   Payment notesF) A) and B)
G) B) and D) B

Question 20

"Yard Mowing." Paula agreed to mow John's yard once a week for $50 per week throughout the summer. Paula, however, was having trouble getting her money from John. On one occasion, he in handwriting gave her in IOU saying "I, John Jones, owe Paula Smith $50." A couple of weeks later, John did not have the money to pay Paula what he owed her, and he handwrote the following on a piece of paper and gave it to her: "I, John Jones, promise to pay Paula Smith or to bearer, the sum of $100 on Monday, July 22, 2013." Paula quit mowing John's yard; and, disgusted with John, Paula assigned both documents to Vince. When Vince presented the documents to John, John refused to pay on the basis that after inspecting the yard, he decided that Paula was doing a poor job. Vince told him the documents constituted negotiable instruments, but John pointed out that he had not signed the documents with his signature at the end.
-Considering only the issue of terminology, not the issue of handwriting or whether Paula properly performed, which of the following is true regarding whether the language "I, John Jones, owe Paula Smith $50" is insufficient to establish elements required for a negotiable instrument?

Accepted Answer

A)   The language is sufficient because it acknowledges the debt, and that is the only required standard.
B)   The language is insufficient because it only acknowledges the debt and is not a promise to pay.
C)   The language is sufficient only because the instrument is in an amount under $500.
D)   The language is sufficient because it acknowledges the debt and is also a promise to pay.
E)   The language is sufficient because it acknowledges the debt and is unconditional.F) C) and D)
G) D) and E)

Exam 26: Negotiable Instruments: Negotiability and Transferability

When a specific payee is named in an instrument, the instrument is known as a[n] _____ instrument.

Correct Answer
verified

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

Correct Answer
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A certificate of deposit is a ______ of the bank.

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

Correct Answer
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Under the UCC which of the following statements is sufficient to make a promise or order to pay conditional?

Correct Answer
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What two characteristics must a written document have in order to satisfy the requirement that a negotiable instrument be in writing?

Correct Answer
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Correct Answer
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Correct Answer
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Before Phil endorsed the check it was a[n] __ instrument; and after he endorsed it, the check was a[n] _ instrument.

Correct Answer
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What does the term "float" in banking reference?

Correct Answer
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A

Correct Answer
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All negotiable documents may be in electronic format.

Correct Answer
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Which of the following is true regarding simple contracts as compared to negotiable instruments?

Correct Answer
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A

Which of the following is true when an instrument fails to meet the technical requirements necessary to qualify as a negotiable instrument?

Correct Answer
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Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

Correct Answer
verified

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

Correct Answer
verified

Anne orally promises Judy that in return for Judy washing Anne's dog, Anne unconditionally promises to pay Judy $50 the next Wednesday. Is a contract formed, is it negotiable, and why or why not?

Correct Answer
verified
It appears that a contract is formed bec...
View Answer

If an instrument is silent as to the time of payment, which of the following is assumed by the UCC?

Correct Answer
verified

Documents used as payments to facilitate commercial transactions were originally generically called ____.

Correct Answer
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B

Correct Answer
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Exam 26: Negotiable Instruments: Negotiability and Transferability

When a specific payee is named in an instrument, the instrument is known as a[n] _____ instrument.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A certificate of deposit is a ______ of the bank.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Under the UCC which of the following statements is sufficient to make a promise or order to pay conditional?

Correct AnswerverifiedShow Answer

What two characteristics must a written document have in order to satisfy the requirement that a negotiable instrument be in writing?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Before Phil endorsed the check it was a[n] ______ instrument; and after he endorsed it, the check was a[n] _____ instrument.

Correct AnswerverifiedShow Answer

What does the term "float" in banking reference?

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

All negotiable documents may be in electronic format.

Correct AnswerverifiedShow Answer

Which of the following is true regarding simple contracts as compared to negotiable instruments?

Correct AnswerverifiedA

Which of the following is true when an instrument fails to meet the technical requirements necessary to qualify as a negotiable instrument?

Correct AnswerverifiedShow Answer

Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Anne orally promises Judy that in return for Judy washing Anne's dog, Anne unconditionally promises to pay Judy $50 the next Wednesday. Is a contract formed, is it negotiable, and why or why not?

Correct AnswerverifiedIt appears that a contract is formed bec...View AnswerShow Answer

If an instrument is silent as to the time of payment, which of the following is assumed by the UCC?

Correct AnswerverifiedShow Answer

Documents used as payments to facilitate commercial transactions were originally generically called ____.

Correct AnswerverifiedB

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Before Phil endorsed the check it was a[n] __ instrument; and after he endorsed it, the check was a[n] _ instrument.

Correct Answer
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Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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It appears that a contract is formed bec...
View Answer

Correct Answer
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Correct Answer
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B

Correct Answer
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