LAW 3033- NEGOTIABLE INSTRUMENTS LAW/ BANKING LAW

FINAL DEPARTAMENTAL EXAMINATION

First Semester, Academic Year 2018-2019

1. Which of the following makes the sum payable not certain?

a. the amount is payable with _____ interest;
b. the amount includes litigation expenses if not paid at maturity;
c. the amount is payable in three (3) monthly installments
d. all of the above
2. In a contract of sale, the issuance of a negotiable instrument is:
a. the principal contract;
b. an incident of the contract
c. the prestation of the contract
d. an object of the contract
3. Marco prepared a bearer promissory note but did not sign it. Pedro got hold of the PN and forged the
signature of Marco and then indorsed it to Inday who is now the holder. Choose the legal effect of the
transaction:
a. Inday can collect from Marco because he is principally liable for the moment the PN is completed;
b. Inday cannot collect from Marco because his forged signature is wholly inoperative;
c. Inday cannot collect from Marco because the instrument is wholly inoperative
d. Inday can collect from Marco and Pedro because she is presumed to be a holder in due course;
4. Where the value has at any time been given for the instrument, the holder is deemed a holder for value in
respect to:
a. only subsequent parties who were not informed that no value was given;
b. all parties who become such subsequent to that time
c. only prior parties who had no knowledge that no value was given
d. all parties who become such prior to that time
5. Absence or failure of consideration is a matter of defense as against:
a. all holders;
b. holders in due course;
c. any person not a holder in a due course;
d. all of the above;
6. A holder who has a lien on the instrument arising either from a contract or by implication of law is deemed a :
a. holder in due course;
b. holder for value to the extent of his lien;
c. holder for value;
d. holder;
7. One that is payable for money:
a. The amount to be paid is “1,000.001 in foreign currency;”
b. “1,000.00 payable in gold;”
c. “1,000.00 payable in 10 peso coins;”
d. The amount to be paid is “1,000.00 or one (1) box canned sardines at the option of creditor.”
8. Which of the following is not an essential attribute of a promissory note?
a. contains on unconditional order in writing;
b. it is signed by the marker who is primarily liable;
c. it is payable to order or holder
d. the person primarily liable engages to pay it in according to its tenor in a sum certain in money.
 9. Statement A: A bill operates as an assignment of the funds in the hands of the drawee available for the
payment thereof.
Statement B: The drawee is not liable on the bill unless and until the bill is presented for acceptance:
a. Both statements are true;
b. Both statements are false
c. Only statement A is true;
d. Only statement B is true.
10. It does not constitute a promise to pay:
a. “to be paid;”
b. “good for;”
c. “due on demand;”
d. “for value received;”
11. An equivalent of an “order” under Sec.1 (b) of the NIL:
a. “assign;”
b. “let the bearer;”
c. “I authorize you to pay;”
d. “I expect you to pay;”
12. One of which has not been presented for payment within a reasonable time after its issue and therefore not
negotiable;
a. overdue bill of exchange;
b. overdue promissory note;
c. stale check;
d. all of the above.
13. When a check is dishonored upon presentment of payment, what is the legal effect?
a. the payee may sue the drawee-bank;
b. the drawee-bank is liable to the drawer when the deposit is sufficient;
c. a contractual relation is created among the payee, the drawee and the drawee-bank.;
d. all of the above.
14. Crossing of the check menas:
a. it is negotiable until it is deposited;
b. it serves as a warning to the holder that the check has been issued for a definite purpose only;
c. it may be encashed;
d. it may only be deposited to the account of the indorsee.
15. An illustration of an instrument that is payable at a fixed time:
a. “Ten (10) days after date, I promise to pay Pamela or order P 1,000.00;”
b. “Due to Pamela or order P 1,000.00 payable at the soonest possible time;”
c. “Ten (10) days after the death of my grandfather, I promise to pay to the order of Pamela P 1,000.00;”
d. all of the above.
16. Where the instrument is so ambiguous that there is doubt whether it is a bill or note, it is:
a. an option bill or note;
b. not negotiable;
c. an incomplete bill of exchange;
d. an incomplete promissory note.
17. What is the effect of material alteration on the instrument without the assent of all parties liable thereon?
a. the instrument is avoided subject to exceptions;
b. the alteration is wholly inoperative;
c. the holder in due course cannot enforce the instrument;
d. the parties prior to the alteration have a complete real defense.
18. Unconditional promise is essential to the negotiability of a promissory note and it may be expressed in
phrases of equivalent meaning. Which of the following does not signify promise?
a. “payable;”
b. “I.O.U. P 1,000.00;”
c. “due on demand;”
d. “I undertake to make good;”
19. One that expresses a sum certain:
a. to pay P 1,000.00 or my salary for the next month:
b. to pay P 5,000.00 and my share of the profits;
c. to pay P10,000.00 plus interest;
d. to pay P 15,000 plus the fair market value of my specific car;
20. Statement A: A promissory note providing for acceleration at the option of the holder is not negotiable.
Statement B: An instrument that is payable at a definite time subject to extension at the election of the holder
is negotiable.
a. Both statements are true;
b. Both statements are false;
c. Only statement A is true;
d. Only statement B is true.
21. Words that do not indicate negotiability:
a. “Due to Patricia or order;”
b. “I acknowledged being indebted in the amount of P 1,000.00 to Angelica or demand;”
c. “I owed Fatima P 2,000.00 to be paid on March 15,2019;”
d. none of the above.
22. The validity and negotiable character of an instrument is not affected by this omission:
a. no language of negotiability;
b. not payable to “order or bearer;”
c. the instrument is not dated;
d. does not specify the currency.
23. Recital of this reference in the instrument makes it conditional:
a. “this instrument is issued per agreement of the parties;”
b. “the issuance is pursuant to the terms of the contract of lease;”
c. “the bill is governed by the memorandum of agreement between the parties;”
d. this note is secured by the real estate mortgage.
24. An instrument to be negotiable, the time payment must be certain. In this case, however, the time payment is
not certain:
a. “30 days after date;”
b. “ten (10) days after the death of his father;
c. “on or before September 27,2019;”
d. “on or before the start of the next school year.”
25. An instrument is not negotiable if it contains a promise or order to do any act in addition to the payment of
money, what is the exception?
a. sale of a collateral in case the instrument is not paid at maturity;
b. waiver of presentment;
c. requiring the maker to deliver additional security if the holder deems the collateral has bee impaired
even before maturity.
d. all of the above.
26. The holder has the option to treat the bill as dishonored when :
a. acceptance is written on a paper other than the bill itself;
 b. drawee destroys the bill;
c. drawee refuses within 24 hours after delivery to return the bill accepted or non-accepted;
d. all of the above.
27. A general acceptance:
a. a bill addressed to Bernard and Bonin is accepted by Bernard only;
b. “accepted, payable at BPI;”
c. a bill for P 10,000.00 is accepted for P5,000.00 only;
d. a bill payable 10 days after sight is accepted “15 days after sight.”
28. In this case presentment for acceptance is not necessary:
a. a bill payable after sight;
b. a check;
c. a bill payable at UCPB Makati, drawn against the drawee residing at Batangas;
d. answer not given.
29. It is formal instrument executed by a notary public stating steps accompanying dishonor of a bill:
a. notice of dishonor;
b. notice of presentment;
c. protest;
d. waiver of notice of dishonor.
30. An instance where notice of dishonor is not waived:
a. a promise to pay note after learning of the maker’s default;
b. an undertaking to pay the interest after the party primarily liable failed to pay;
c. a proposal to compromise;
d. none of the above.
31. A person placing his signature upon an instrument otherwise that as a maker, drawee, or acceptor is deemed
to be:
a. an indorser;
b. an accommodation party;
c. an irregular indorser;
d. a trustee.
32. Renunciation in favor of a secondary party may be made by the holder:
a. before maturity of the instrument;
b. at maturity;
c. after maturity;
d. all of the above.
33. It is not a material alteration:
a. an alteration on the serial number of a check;
b. an innocent change in the date of the instrument;
c. an addition of the word “surety” after the name of the co-maker;
d. an erasure of the word “agent” appearing after the name of the party.
34. A person may involve defense of the forgery:
a. a party prior to forgery;
b. a person who made warranties;
c. a person who is negligent;
d. none of the above.
35. The title of the person who negotiates the instrument is defective when:
a. the instrument is obtained for an illegal consideration;
b. he filled up the blanks in a negotiable instrument in violation of the authority given to him;’
c. he inserted a wrong date;
 d. all of the above.
36. Statement A: AN overdue instrument may still be negotiated but the holder cannot be a holder in due course:
Statement B: A dishonored instrument may still be negotiated and the holder will always be a holder in due
course.
a. Only statement A is correct;
b. Only statement B is correct;
c. Both statements are true;
d. Both statements are false.
37. A legal effect in crossing a check:
a. it may be encashed;
b. it may only be deposited by the one who has an account with a bank;
c. the check cannot be negotiated;
d. the endorse may be a holder in due course.
38. The date of maturity of an instrument payable on demand is determined by the date of:
a. presentment;
b. issue;
c. negotiation;
d. instrument.
39. Where an instrument is negotiated back to a prior party, such party may further negotiate the same but he is
not entitled to enforce payment thereof against these parties whom he was personally liable:
a. all parties;
b. immediate parties;
c. intervening parties;
d. remote parties.
40. When a negotiable instrument payable to order is transferred for value without indorsement, what is the legal
effect?
a. it is considered an equitable assignment;
b. the transferee is not a holder;
c. ownership of the instrument is transferred;
d. all of the above.
41. Marie issued a promissory note in favor of Pepsi for P 5,000.00. Pepsi endorsed it to Iris as a gift for the
latter’s forthcoming 17th birthday, and immediately thereafter Iris indorsed the note to Herman. Upon maturity
of the note, Marie dishonored it. What defenses are available to the party?
a. real defense of minority only;
b. lack of consideration and minority as real defenses;
c. lack of consideration and minority personal defenses;
d. lack of consideration as personal defense and minority as real defense.
42. A party in whose favor a person, without receiving value therefor, signs an instrument for the purpose of
lending his credit and enable this party to raise money upon it:
a. accommodated party;
b. immediate party;
c. remote party;
d. accommodation party.
43. Which of the following indorsements is allowed under the Negotiable Instrument Law?
a. a bill for P 4,000.00: “pay to Jose P3,000.00, and pay Manuel P1,000.00:”
b. a note for P3,000.00: “pay to cheesy P2,000.00 only;”
c. “pay to Fema and Julian;”
d. all of the above.
44. A legal consequence of a qualified indorsement:
a. guarantees the payment of the instrument;
b. transfers title;
c. makes the transferee a holder;
d. all of the above.
45. Choose the common warranty of the maker, drawer, and acceptor:
a. admits the existence of the payee;
b. engages that on due presentment, the instrument will be paid according to its tenor;
c. admits the capacity of the indorser to indorse;
d. all of the above.
46. Statement A: A drawer may limit his own liability to the holder.
Statement B: A drawer may enlarge his own liability to subsequent parties.
a. Both statements are true;
b. Both statements are false;
c. Only statement A is true;
d. Only statement B is true.
47. Statement A: To fix the liability of an indorser as a guarantor, certain conditions must be compiled with.
Statement B: However, there are no conditions required to fix the indorser’s liability for breach of warranty.
a. Both statements are true;
b. Both statements are false;
c. Only statement A is true;
d. Only statement B is true.
48. Liability of an agent or broker who negotiates a bearer instrument without indorsement and without disclosing
his principal:
a. liability of a general indorser;
b. liability of a qualified indorser;
c. liability of a restrictive indorser;
d. agent not liable.
49. Acceptance, as distinguished from payment:
a. discharges the instrument;
b. connotes actual performance;
c. contemplates further circulation;
d. indicates compliance with the obligation.
50. A consequence of certifying a check:
a. the bank is primarily liable;
b. operates as an assignment of funds;
c. the holder becomes a depositor of the drawee-bank;
d. all of the above.
51. Batas Pambansa Blg.22 or the Bouncing Check Law is applicable to:
a. the act of making or drawing and issuing a worthless check;
b. the making and issuing of a check by one who has no account with a banks;
c. the making and issuing of a check from an account that was already closed;
d. all are covered by BP 22.
52. Under BP 22, when a bounced check is drawn by a corporation, who are liable?
a. members of the board directors;
b. persons who actually signed the check;
c. the president and treasurer;
d. persons who signed the contract resulting to the issuance of the check.
53. The prima facie knowledge of insufficiency of funds under BP 22 arises from:
a. fact of drawing, making, and issuing of a bum check;
b. the receipt of notice of honor;
c. receipt of notice of dishonor and drawer failed to pay the holder;
d. the time the check is presented for payment and it was dishonored.
54. The maximum deposit insurance coverage (MDIC) per deposit under RA 3561, as amended (PDIC):
a. P 400,000.00;
b. at least P 500,000.00;
c. P 500,000.00;
d. more than P 500.000.00.
55. It is the amount due to a bona fide depositor for legitimate deposits in an insured bank net of any obligation of
the depositor to the insured bank as of date of closure:
a. insured deposit;
b. qualified deposit;
c. net obligation to a depositor;
d. liquidation amount.
56. Membership of banks to PDIC is mandatory except for:
a. savings and loans associations;
b. branches of foreign banks in the Philippines;
c. branches of domestic banks outside the Philippines;
d. cooperative banks.
57. Accounts which are not allowed to be insured with PDIC:
a. investment products such as bond, securities, and trust accounts;
b. accounts which are unfunded, fictitious, and fraudulent;
c. deposits products constituting or emanating from unsafe and unsound banking practice;
d. all of the above.
58. Products protected by the Law on Secrecy of Bank Deposits (LSBD) and considered confidential in nature:
a. all deposits of whatever nature with banks;
b. investments in bonds;
c. investments in trust accounts;
d. all of the above.
59. An exception to LSBD:
a. upon oral permission or consent of the depositor;
b. in case of impeachment of a Senator for graft and corruption;
c. in case where the money deposited is subject matter of litigation;
d. upon order of any court in cases of treason and other high crimes.
60. Statement A: The Foreign Currency Deposit Act (FCDA) restricts the withdrawal by the depositor of his
deposit except those arising from the contract between depositor and the bank.
Statement B: FCDA exempt foreign currency deposits from attachment, garnishment, or any other or process
of any court, legislative body, government agency or any administrative body whatsoever.
a. Both statements are true;
b. Both statements are false;
c. Only statement A is true;
d. Only statement B is true.
61. The term includes credits or deposits if money, bullion, security, or any other evidence of indebtedness of any
kind, and interest thereon with banks in favor of any person known to be dead, or who has not made further
deposits or withdrawal during the preceding 10 (ten) years or more:
a. unclaimed balances;
 b. foreign currency deposit;
c. trust account;
d. dormant deposit.
62. A crime whereby the proceeds of an unlawful activity as defined in the law are transacted thereby making
them appear to have originated from legitimate sources:
a. swindling;
b. money market manipulation;
c. money laundering;
d. embezzlement.
63. Covered transaction under AMLA:
a. P 500,000.00;
b. P 500,000.00 within a banking day;
c. a total amount in excess of P500,000.00 within one banking day;
d. not more than P 500,000.00.
64. A suspicious transaction under AMLA:
a. there is no underlying legal or trade obligation, purpose or economic justification;
b. the client’s transaction is structured to avoid being the subject of reporting requirements;
c. the client is not properly identified;
d. all of the above.
65. It is an extraordinary and interim relief to prevent the dissipation, removal, or disposal of properties that are
suspected to be the proceeds of, or related to, unlawful; activities as defined in RA No. 9160:
a. interlocutory order;
b. freeze order;
c. certiorari;
d. subpoena.
66. This entity has the authority to exercise powers of a commercial bank and an investment house, and can
invest in non-allied enterprises:
a. central bank;
b. universal bank;
c. commercial bank;
d. private development bank.
67. Standard of diligence required for banks:
a. utmost diligence;
b. highest degree of diligence;
c. extraordinary diligence;
d. all of the above.
68. What is the nature of the relationship between the bank and its depositors?
a. simple loan;
b. fiduciary;
c. depositum;
d. bailment.
69. Statement A: A primary franchise for banks is issued by the Bangko Sentral ng Pilipinas.
Statement B: A secondary franchise for banks is given by the Securities and Exchange Commission.
a. Both statements are false;
b. Both statements are false;
c. Only statement A is false;
d. Only statement B is false.
70. It is an interest bearing deposit account that combines the payable demand feature of checks and investment
feature of savings account:
a. negotiable order or withdrawal account;
b. time deposits;
c. deposit substitute;
d. anonymous account.
71. It is defined as an alternative form of obtaining funds from the public, other than deposits, through the
issuance, endorsement, or acceptance of debt instruments for the borrower’s own account, for the purpose of
relending or purchasing of receivables and other obligations:
a. trust account operation;
b. investment house;
c. deposit substitute;
d. non-allied undertaking of banks.
72. Interest bearing deposit accounts that combine the payable on demand feature of checks and investment
feature of saving accounts:
a. time deposits;
b. NOW accounts;
c. demand deposits;
d. repo agreement.
73. What is the credit exposure limit of a bank to a single borrower?
a. 25% of the net worth of the creditor-bank;
b. 20% of the net worth of the creditor-bank;
c. 25% of the total credit commitment of the bank to all borrowers;
d. 20% of the total assets of the bank.
74. No director or officer of any bank shall , directly or indirectly, for himself or as the representative or agents of
others, borrow for such bank nor shall he become a guarantor, endorser or surety for loans from such bank to
others, or on in any manner be an obligor or incur any contractual liability to the bank, what is the exception?
a. when there is a written approval of the majority of all the directors of the bank, excluding the director
concerned;
b. accommodations to offer under any fringe benefit plan;
c. in case of emergency when the accommodation granted to any of its directors, officers or
stockholders and their related interests is upon terms not less favorable to the bank than those offered
to others;
d. answer not given.
75. What is the nature of the monetary Board?
a. It is a judicial body exercising quasi-judicial functions;
b. it is a quasi-judicial agency;
c. it is body incorporate with fiscal and administrative autonomy private in nature;
d. it is a banking institution with power to supervise other banks.