Essay - Quiz Negotiable Instrument
Essay - Quiz Negotiable Instrument
Name: ___________________
Multiple Choice:
1. First Statement: Negotiable instruments are considered substitute for money, hence
considered as legal tender.
Second Statement: A legal tender is a medium of exchange which the law compels the
creditor to accept in payment for obligations.
a) Both are true c. Only first statement is true
b) Both are false d. Only second statement is true
4) X obtains the signature of Y for autograph purpose. X writes a negotiable promissory note
above Ys signature. The note was validly negotiated to A who is a holder in due course. What
kind of defense can Y avail against A?
a. Personal defense
b. Real defense
c. Qualified defense
d. Equitable defense
5) M signed a blank check which he inadvertently left in his desk at his office. P later stole the
same, who filled in the amount of P 20,000.00 and a fictitious name as payee. P then indorsed
the check in the payees name and indorsed the check to A; thereafter, A indorsed to B; then B
to C, and C to D.
a) D cannot enforce the instrument against M only if D is holder in due course
b) D can enforce the instrument against M even if D is not a holder in due course because
the signature of D is genuine
c) D cannot enforce the instrument against any one of the prior parties because the
instrument is not a valid instrument and therefore, not negotiable
d) D can enforce the instrument against any one of the prior parties except M
6) The validity and negotiability of an instrument are not affected by the following omissions,
except
a. It is not dated
b. Does not specify where it is drawn or the place where it is payable
c. Designates a particular fund from which payment is to be made
d. None of the above
7) Instances when presentment for payment is excused
a. Where after the exercise of reasonable diligence presentment as required by this Act
cannot be made
b. Where the drawee is a fictitious person
c. By waiver of presentment, express or implied
d. Where there are excusable circumstances which are unavoidable and not attributable to
the fault of the holder
8) All are requisites of actual acceptance, except
a. It must be in writing and signed by the drawer
b. It must not express that the drawee will perform his promise by any other means than
the payment of money
c. There must be delivery or notification of the acceptance
d. None of the above
11) Alex issued a negotiable PN (promissory note) payable to Benito or order in payment of
certain goods. Benito indorsed the PN to Celso in payment of an existing obligation. Later Alex
found the goods to be defective. While in Celsos possession the PN was stolen by Dennis who
forged Celsos signature and discounted it with Edgar, a money lender who did not make
inquiries about the PN. Edgar indorsed the PN to Felix, a holder in due course. When Felix
demanded payment of the PN from Alex the latter refused to pay. Dennis could no longer be
located.
a) What are the rights of Felix, if any, against Alex, Benito, Celso and Edgar? Explain
b) Does Celso have any right against Alex, Benito and Felix? Explain.
12) AX, a businessman, was preparing for a business trip abroad. As he usually did in the past,
he signed several checks in blank and entrusted them to his secretary with instruction to
safeguard them and fill them out only when required to pay accounts during his absence. OB,
his secretary, filled out one of the checks by placing her name as the payee. She filled out the
amount, endorsed and delivered the check to KC, who accepted it in good faith for payment of
gems that KC sold to OB. Later, OB told AX of what she did with regrets. AX timely directed the
bank to dishonor the check.
a) Could AX be held liable to KC? Answer and reason briefly.