MCQ
MCQ
A. No, because the exercise of the option to pay lies 6. X executed a promissory note with a face value of
with A, the maker and debtor. Php50,000.00, payable to the order of Y. Y
B. No, because it authorizes the sale of collateral indorsed the note to Z, to whom Y owed
securities in case the note is not paid at maturity. Php30,000.00. If X has no defense at all against Y,
C. Yes, because the note is really payable to B or his for how much may Z collect from X?
order, the other provisions being merely optional.
D. Yes, because an election to require something to be A. Php20,000.00, as he is a holder for value to the
done in lieu of payment of money does not affect extent of the difference between Y's debt and the
negotiability. value of the note.
B. Php30,000.00, as he is a holder for value to the
2. M makes a promissory note that states: “I, M, extent of his lien.
promise to pay Php5,000.00 to B or bearer. C. Php50,000.00, but with the obligation to hold
Signed, M.” M negotiated the note by delivery to Php20,000.00 for Y's benefit.
B, B to N, and N to O. B had known that M was D. None, as Z's remedy is to run after his debtor, Y.
bankrupt when M issued the note. Who would be
liable to O? 7. P sold to M 10 grams of shabu worth
Php5,000.00. As he had no money at the time of
A. M and N since they may be assumed to know of M's the sale, M wrote a promissory note promising to
bankruptcy pay P or his order Php5,000. P then indorsed the
B. N, being O's immediate negotiator of a bearer note note to X (who did not know about the shabu),
C. B, M, and N, being indorsers by delivery of a bearer and X to Y. Unable to collect from P, Y then sued X
note on the note. X set up the defense of illegality of
D. B, having known of M's bankruptcy consideration. Is he correct?
3. A negotiable instrument can be indorsed by way A. No, since X, being a subsequent indorser, warrants
of a restrictive indorsement, which prohibits that the note is valid and subsisting.
further negotiation and constitutes the indorsee B. No, since X, a general indorser, warrants that the
as agent of the indorser. As agent, the indorsee note is valid and subsisting.
has the right, among others, to C. Yes, since a void contract does not give rise to any
right.
A. demand payment of the instrument only. D. Yes, since the note was born of an illegal
B. notify the drawer of the payment of the instrument. consideration which is a real defense.
C. receive payment of the instrument.
D. instruct that payment be made to the drawee. 8. A holder in due course holds the instrument free
from any defect of title of prior parties and free
4. Under the Negotiable Instruments Law, a from defenses available to prior parties among
signature by procuration operates as a notice themselves. An example of such a defense is –
that the agent has but a limited authority to sign.
Thus, a person who takes a bill that is drawn, A. fraud in inducement.
accepted, or indorsed by procuration is duty- B. duress amounting to forgery.
bound to inquire into the extent of the agent's C. fraud in esse contractus.
authority by: D. alteration.
27. Can a drawee who accepts a materially altered 31. X, creditor of Y, obtained a judgment in his favor
check recover from the holder and the drawer? in connection with Y's unpaid loan to him. The
court's sheriff then levied on the goods that Y
A. No, he cannot recover from either of them. stored in T's warehouse, for which the latter
B. Yes from both of them. issued a warehouse receipt. A month before the
C. Yes but only from the drawer. levy, however, Z bought the warehouse receipt
D. Yes but only from the holder. for value. Who has a better right over the goods?
28. The rule is that the intentional cancellation of a A. T, being the warehouseman with a lien on the goods
person secondarily liable results in the discharge B. Z, being a purchaser for value of the warehouse
of the latter. With respect to an indorser, the receipt
holder's right to cancel his signature is: C. X, being Y’s judgment creditor
D. Y, being the owner of the goods
A. without limitation.
B. not limited to the case where the indorsement is 32. A promissory note states, on its face: “I, X,
necessary to his title. promise to pay Y the amount of Php 5,000.00 five
C. limited to the case where the indorsement is not days after completion of the on-going
necessary to his title. construction of my house. Signed, X.” Is the note
D. limited to the case where the indorsement is negotiable?
necessary to his title.
A. Yes, since it is payable at a fixed period after the
29. X executed a promissory note in favor of Y by way occurrence of a specified event.
of accommodation. It says: “Pay to Y or order the B. No, since it is payable at a fixed period after the
amount of Php50,000.00. Signed, X.” Y then occurrence of an event which may not happen.
indorsed the note to Z, and Z to T. When T sought C. Yes, since it is payable at a fixed period or
collection from Y, the latter countered as determinable future time.
indorser that there should have been a D. No, since it should be payable at a fixed period
presentment first to the maker who dishonors it. before the occurrence of a specified event.
Is Y correct?
33. P sold to M a pair of gecko (tuko) for
A. No, since Y is the real debtor and thus, there is no Php50,000.00. M then issued a promissory note
need for presentment for payment and dishonor by to P promising to pay the money within 90 days.
the maker. Unknown to P and M, a law was passed a month
B. Yes, since as an indorser who is secondarily liable, before the sale that prohibits and declares void
there must first be presentment for payment and any agreement to sell gecko in the country. If X
dishonor by the maker. acquired the note in good faith and for value,
C. No, since the absolute rule is that there is no need for may he enforce payment on it?
presentment for payment and dishonor to hold an
indorser liable. A. No, since the law declared void the contract on
D. Yes, since the secondary liability of Y and Z would which the promissory note was founded.
only arise after presentment for payment and B. No, since it was not X who bought the gecko.
dishonor by the maker. C. Yes, since he is a holder in due course of a note
which is distinct from the sale of gecko.
30. T delivers two refrigerators to the warehouse of D. Yes, since he is a holder in due course and P and M
W who then issues a negotiable receipt were not aware of the law that prohibited the sale of
undertaking the delivery of the refrigerators to gecko.
“T or bearer.” T entrusted the receipt to B for
safekeeping only. B negotiated it, however, to F 34. P authorized A to sign a bill of exchange in his
who bought it in good faith and for value. Who is (P’s) name. The bill reads: “Pay to B or order the
entitled to the delivery of the refrigerators? sum of Php1 million. Signed, A (for and in behalf
of P).” The bill was drawn on P. B indorsed the
bill to C, C to D, and D to E. May E treat the bill as
a promissory note?
4
A. No, because the instrument is payable to order and A. Yes, as long as the indorser received value for the
has been indorsed several times. restrictive indorsement.
B. Yes, because the drawer and drawee are one and the B. Yes, as long as the indorser received value for the
same person. conditional indorsement.
C. No, because the instrument is a bill of exchange. C. Yes, whether or not the indorser received value for
D. Yes, because A was only an agent of P. the conditional indorsement.
D. Yes, whether or not the indorser received value for
35. Z wrote out an instrument that states: “Pay to X the restrictive indorsement.
the amount of Php1 Million for collection only.
Signed, Z.” X indorsed it to his creditor, Y, to 39. X issued a check in favor of his creditor, Y. It
whom he owed Php1 million. Y now wants to reads: “ Pay to Y the amount of Seven Thousand
collect and satisfy X's debt through the Php1 Hundred Pesos (Php700,000.00). Signed, X”.
million on the check. May he validly do so? What amount should be construed as true in such
a case?
A. Yes, since the indorsement to Y is for Php1 Million.
B. No, since Z is not a party to the loan between X and Y. A. Php700,000.00.
C. No, since X is merely an agent of Z, his only right B. Php700.00.
being to collect. C. Php7,000.00.
D. Yes, since X owed Y Php1 Million. D. Php700,100.00.
36. In a signature by procuration, the principal is 40. P authorized A to sign a negotiable instrument in
bound only in case the agent acted within the his (P’s) name. It reads: “Pay to B or order the
actual limits of his authority. The signature of the sum of Php1 million. Signed, A (for and in behalf
agent in such a case operates as notice that he of P).” The instrument shows that it was drawn
has on P. B then indorsed to C, C to D, and D to E. E
then treated it as a bill of exchange. Is
A. a qualified authority to sign. presentment for acceptance necessary in this
B. a limited authority to sign. case?
C. a special authority to sign.
D. full authority to sign. A. No, since the drawer and drawee are the same
person.
37. A bill of exchange states on its face: “One (1) B. No, since the bill is non-negotiable, the drawer and
month after sight, pay to the order of Mr. R the drawee being the same person.
amount of Php50,000.00, chargeable to the C. Yes, since the bill is payable to order, presentment is
account of Mr. S. Signed, Mr. T.” Mr. S, the drawee, required for acceptance.
accepted the bill upon presentment by writing on D. Yes, in order to hold all persons liable on the bill.
it the words “I shall pay Php30,000.00 three (3)
months after sight.” May he accept under such
terms, which varies the command in the bill of
exchange?