DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
Second Semester A.Y. 2012-2013
Accounting Review 2
Quiz VII Negotiable Instruments Law
Name:____________________________________________________________________Date:___________________________
_
Section:__________________________________________________________________Score:___________________________
Direction: Read and solve the following problems. Write the letter of your best answer on the space provided before
each number. Erasures are not allowed and considered wrong.
___1. A negotiable instrument can be indorsed by way of restrictive indorsement which prohibits further negotiation and
constitutes the indorsee an agent of the indorser. As agent, the indorsee has the right among others to
a. Demand payment of the instrument only
b. Notify the drawer of the payment of the instrument
c. Receive payment of the instrument
d. Instruct that payment be made to the drawee
___2. Under the Negotiable Instruments Law, a signature by procuration operates as a notice that the agent has but a
limited authority to sign. Thus, a person who takes a bill that is drawn, accepted or indorsed by procuration is duty bound
to inquire into the extent of the agents authority by
a. Examining the agents special power of attorney
b. Examining the bill to determine the extent of such authority
c. Asking the agent about the extent of such authority
d. Asking the principal about the extent of such authority
___3. Under the Negotiable Instrument law, if the holder has a lien on the instrument which arises either from a contract or
by implication of law, he would be a holder for value to the extent of
a. His successor in interest
c. The lien in his favor
b. His predecessor interese
d. The amount indicated on the instruments face
___4. A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses
available to prior parties among themselves. An example of such defense is
a. Fraud in inducement
c. Fraud in esse contractus
b. Duress amounting to forgery
d. Alteration
___5. A bill of exchange has T for its drawee, and U as drawer, and F as holder. When F went to T for presentment, F
learned that T is only 15 years old. F wants to recover from U but the latter insists that a notice of dishonor must first be
made, the instrument being a bill of exchange. Is he correct?
a. Yes, since a notice of dishonor is essential to charging the drawer
b. No, since T can waive the requirement of notice of dishonor
c. No since F can treat U as maker due to the minority of T, the drawee
d. Yes, since a bill of exchange, notice of dishonor is at all times required
___6. A material alteration of an instrument without the assent of all parties liable thereon results in its avoidance, except
against a
a. Prior indorsee
b. Subsequent acceptor
c. Subsequent indorser
d. Prior acceptor
___7. B borrowed P1M from L and offered to him his BMW car worth P1M as collateral. B then executed a promissory
note that reads I, B, promise to pay L or bearer the amount of P1M and to keep my BMW car (loan collateral) free from
any other encumbrance. Signed B. Is the note negotiable?
a. Yes, since it is payable to bearer.
b. Yes, since it contains an unconditional promise to pay a sum certain in money.
c. No, since the promise to just pay a sum of money is unclear.
d. No, since it contains a promise to do an act in addition to the payment of money.
___8. If the drawer and the drawee are the same person, the holder may present the instrument for payment without the
need of a previous presentment for acceptance. In such a case, the holder treats it as a
a. Non-negotiable instrument
b. Promissory note
c. Letter of credit
d. Check
___9. D draws a bill of exchange that states One month from date, pay to B or his order P100,000. Signed D. The
drawee named in the bill is E. B negotiated the bill to M, M to N, N to O, and O to P. Due to non-acceptance and after
proceedings for dishonor were made, P asked O to pay, which O did. From whom may O recover?
a. B, being the payee b. N, as indorser to O c. E, being the drawee d. D, being the drawer
___10. Any agreement binding upon the holder to extent the time of payment or to postpose the holders right to enforce
the instrument results in the discharge of the party secondarily liable unless made with the latters consent. This
agreement refers to one which the holder made with the
a. Principal debtor
b. Principal creditor
c. Secondary creditor d. Secondary debtor

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___11. Notice of dishonor is not required to be made in all cases. One instance where such notice is not necessary is
when the indorser is the one to whom the instrument is suppose to be presented for payment. The rationale here is that
the indorser
a. Already knows of the dishonor and it makes no sense to notify him of it
b. Is bound to make the acceptance in all cases
c. Has no reason to expect the dishonor of the instrument
d. Must be made to account for all his actions
___12. Which of the following indorsers expressly warrants in negotiating an instrument that 1) it is genuine and true; 2)
he has good title to it; 3) all prior parties have capacity to negotiate; and 4) it is valid and subsisting at the time of his
indorsement?
a. Irregular indorser
b. Regular indorser
c. General indorser
d. Qualified indorser
___13. Forgery of bills of exchange maybe subdivided into a) forgery of an indorsement on the bill and b) forgery of the
drawers signature, which may either be with acceptance by the drawee, or
a. With acceptance but the bill is paid by the drawee
b. Without acceptance but the bill is paid by the drawer
c. Without acceptance but the bill is paid by the drawee
d. With acceptance but the bill is paid by the drawer
___14. The rule is that the intentional cancellation of a person secondarily liable results in the discharge of the latter. With
respect to an indorser, the holders right to cancel his signature is
a. Without limitation
b. Not limited to the case where the indorsement is necessary to his title
c. Limited to the case where the indorsement is not necessary to his title
d. Limited to the case where the indorsement is necessary to his title
___15. P authorized A to sign a bill of exchange in his (Ps) name. The bill reads: Pay to B or order the sum of P1M.
Signed A. (for and in behalf of P) The bill was drawn to P. B indorsed the bill to C, C to D, and D to E. May E treat the bill
as a promissory note?
a. No because the instrument is payable to order and has been indorsed several times
b. Yes because the drawer and drawee are one and the same person
c. No because the instrument is a bill of exchange
d. Yes because A was only an agent of P
___16. Z wrote out an instrument that states Pay to X the amount of P1M for collection only. Signed Z. X indorsed it to
his creditor, Y, to whom he owed P1M. Y now wants to collect and satisfy Xs debt through the P1M on the check. May he
validly do so?
a. Yes since the indorsement to Y is for P1M
b. No since Z is not party to the loan between X and Y
c. No since X is merely an agent of Z, his only right being to collect
d. Yes since X owed Y P1M
___17. In signature by procuration, the principal is bound only in case the agent acted within the actual limits of his
authority. The signature of the agent in such a case operates as notice that he has
a. A qualified authority to sign
b. A limited authority to sign
c. A special authority to sign
d. Full authority to sign
___18. X issued a check in favor of his creditor, Y. It reads Pay to Y the amount of Seven Thousand Hundred Pesos (Php
700,000) Signed X. What amount should be construed as true in such a case?
a. Php 700,000
b. Php 700
c. Php 7,000
d. Php 700,100
___19. P authorized A to sign a negotiable instrument in his (Ps) name. It reads: Pay to B or order the sum of P1M.
Signed A. The instrument shows that it was drawn on P. B then indorsed to C, C to D, and D to E. E then treated it as a
bill of exchange. Is presentment for acceptance necessary in this case?
a. No since the drawer and drawee are the same person
b. No since the bill is non-negotiable, the drawer and drawee being the same person
c. Yes since the bill is payable to order, presentment is required for acceptance
d. Yes in order to hold all persons liable on the bill
___20. In an obligation to give a determinate thing, what rights are available to the creditor?
I. To compel specific performance
II. To recover damages in case of breach of the obligation
III. To ask that the obligation be complied with at the expense of the debtor
a. All answers are correct
c. I is correct
b. I and II are correct
d. All answers are wrong

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___21. The bill of exchange as distinguished from a check

a. The drawee is always a bank
b. It is always payable on demand
c. The death of the drawer, if known to the bank does not revoke the authority of the banker to pay
d. It is drawn on a deposit or checking account
___22. The following are functions of a negotiable instrument, choose the exception
a. It is a substitute for money
b. It increases credit circulation
c. It increases purchasing power in circulation
d. It extinguishes obligations if its delivery is accepted by the creditor
___23. A promissory note reads I promise to pay B or order eighty zero pesos only (P800.00), signed A. The amount
due is
a. P80.00
b. P800.00
c. Zero
d. Not determinable
___24. A promissory note reads I promise to pay B or order one hundred pesos only (P200.00). Sgd A and C. Which of
the following is correct?
a. Either A or C can be required to pay P100.00
b. Either A or C can be required to pay P200.00
c. The promissory note is not negotiable because the sum payable is not certain in money
d. A and C can be required to pay P100.00 each
___25. A, a minor issued a negotiable promissory note payable to the order of B, also a minor. Later B endorsed the note
to C and C to D and D to E, and E to F. Which of the following is correct?
a. A cannot question the incapacity of the payee
b. If C made a qualified indorsement to D, C is not liable to F
c. The note is not negotiable because the maker and the payee are both minors
d. All indorsers are liable to F, if F is a holder in due course
___26. A person who for value negotiates or transfers a document of tile by indorsement or delivery warrants the
following, except
a. That the document is genuine
b. That the prior parties have the capacity
c. That he has a legal right to negotiate or transfer it
d. That he has no knowledge of any fact which would impair the validity or worth of the document
___27. On October 1,2010, A issued bills in set with 2 parts to B. On October 15, B indorsed the first part to C who
negotiated it to D. On October 30, B indorsed the second part to E who negotiated it to F. Which of the following is not
correct?
a. D is the true owner, hence he can require the drawee to pay him
b. B and C are liable to D
c. B and E are liable to F
d. B is liable to D and F
___28. A complete but undelivered promissory note reads: I promise to pay P or bearer P100,000. Sgd M. P took the note
from Ms drawer and delivered it to A who later delivered it to B who likewise delivered it to C. As a result,
a. C can collect from P if M dishonors the note
b. P is liable to C even of notice of dishonor is not given by C to P
c. Ps warranty extends in favor of A only
d. C should give a notice of dishonor to P to make P liable to him
___29. Using the preceding number, but P made a qualified indorsement but A and B made a special indorsements, in
case M dishonors the note. Which of the following is correct?
a. P is liable to C for breach for warranty
b. A and B, but not P are liable to C
c. P is liable to A only
d. It is only from B that C can recover
___30. A holder in due course is a holder who has taken the instrument under the following conditions, except
a. That the instrument is genuine and in all respect what it purports to be
b. That he became the holder of it before it was overdue, and without notice that it has been previously
dishonored, if such was a fact
c. That he took it in good faith and for value
d. That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title
of the person negotiating it

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___31. Which of the following is a real defense?

a. Want of delivery of an incomplete instrument
b. Total absence of consideration
c. Fraud in inducement
d. Material alteration
___32. Which of the following is a personal defense?
a. Insertion of a wrong date where the instrument is undated
b. Fraud in factum
c. Forgery of a signature
d. The instrument is incomplete and undelivered
___33. Where a bill payable after sight is accepted for honor, its maturity is calculated from the date of
a. The acceptance for honor
b. The noting for non-acceptance
c. The presentment for acceptance
d. The receipt of notice of dishonor from the notary public
___34. Ordinary acceptance as distinguished from acceptance for honor
a. Protest is a prerequisite
b. Consent of the holder is necessary
c. Involves the entire instrument
d. The liability of the acceptor is secondary
___35. The bank is both the drawer and the drawee of the check
a. Cashiers check
b. Certified check
c. Crossed check
d. Postdated check
___36. Where a persons signature appearing on a negotiable instrument will make him liable thereon
a. When a person signs an undelivered and incomplete instrument
b. In case of an indorsement of an instrument by an infant or other incapacitated persons
c. When a person signs in a trade or assumed name
d. In case of a signature by an authorized agent, indicating that he signs as an agent and disclosing his principal.
___37. Which of the following is not correct? Where a negotiable promissory note has been issued for an illegal purpose
a. The note as a contract is void
b. The payee may have no cause of action against the maker
c. No legal effects may flow therefrom considering that the contract is void
d. Once negotiated, the liability in favor of a holder in due course may ensue against the maker
___38. The crossing of a check where the words written between the two parallel lines are and Co. or for payees
account only is
a. general
b. special
c. qualified
d. restrictive
___39. The crossing of a check where the name of a bank or a business institution is written between the two parallel
lines, which means that the drawee should pay only with the intervention of that company is
a. general
b. special
c. qualified
d. restrictive
___40. Which of the following is not a requirement for the sufficiency of presentment for payment?
a. It must be made by the holder or by some person authorized to receive payment on his behalf
b. It must be made at a reasonable hour on a business day
c. There must be a previous notice of dishonor to the parties secondarily liable except if notice is excused
d. It must be made to the person primarily liable on the instrument or if he is absent or inaccessible, to any person
found at the place where the presentment is made
___41. The requirements before payment can be considered as payment in due course are as follows, except
a. Payment must be made in good faith and without notice that the title of the holder is defective
b. Payment made by the indorser where the instrument was previously accepted for the honor of such indorser
c. Payment must be made to the holder or any authorized representative
d. The payment is made at or after the maturity of the instrument
___42. If a negotiable promissory note is not presented for payment and presentment is not excused, which of the
following is correct?
a. Only the maker is discharged
b. Only the indorser is discharged
c. Both the maker and indorser are discharged
d. Neither the maker nor the indorser is discharged because the holder can still give notice of dishonor
___43. If notice was given by or on behalf of the holder, who will be benefited by such notice of dishonor?
I. All subsequent holders
II. All prior parties who have a right of recourse against the party to whom notice is given
a. True, True
b. False, False
c. True, False
d. False, True

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___44. Where the instrument has been dishonored in the hands of an agent, which of the following is not correct?
a. The agent may give notice to the parties liable thereon
b. If the agent gives notice to his principal, he must do so within the same time as if he were the holder
c. The principal may also give notice within the same time as if it were dishonored in his hand
d. The principal, upon the receipt of notice from his agent, has the same time for giving notice as if the agent had
been an independent holder.
___45. To whom notice of dishonor should be given?
I. Where the parties to be notified are partners, notice to any one partner is notice to the firm, even though there
has been dissolution.
II. Notice to persons jointly liable who are partners must be given to each of them unless one of them has
authority to receive such notice for the others.
a. True, True
b. False, False
c. True, False
d. False, True
___46. Notice of dishonor is not required to be given to the drawer in the following cases, except
a. Where the drawer is the agent of the drawee and the drawee dishonored the instrument
b. Where the drawer closed his account with the drawee bank
c. Where the drawee is a minor
d. Where the bill was renegotiated to the payee
___47. A issued a negotiable bill of exchange payable to the order of B. Subsequent indorsements are: B to D, D to E,
and E to F. When F presented the instrument for acceptance, the drawee dishonored the instrument. F gave notice of
dishonor to D. Later F indorsed the bill to G who likewise indorsed the bill to H, a holder in due course. If the bill is again
dishonored by non-acceptance in the hands of H, which of the following is correct?
a. D, F and F are liable to H even if notice of dishonor are not given to them
b. The notice previously given to D inures to the benefit of E, F, G and H
c. F can collect from E if H required F to pay him
d. A, B and E were previously discharged hence, H should give notice of dishonor to F and E
___48. He is a party on the face of the bill and yet is not yet liable.
a. Drawer
b. Drawee
c. Acceptor
d. Indorser
___49. M issued a negotiable promissory note to the order of P. P indorsed and delivered the note to A. A, in turn indorsed
and delivered the note to B and B, later negotiated the note to C. On due date, C did not present the note to M for
payment. Later, C went to court and sued M and the indorsers. Will the case against them prosper?
a. Yes, because M as maker is primarily liable and the indorsers are secondarily liable
b. No because C should first make a presentment for payment to M
c. Yes in so far as M is concerned but no in so far as the indorsers are concerned
d. No in so far as M is concerned but yes in so far as the indorsers are concerned
___50. In payment of merchandise purchased by A from B, A made a promissory note which reads: I promise to pay B
P100,000. Sgd. A. B indorsed and delivered the note to C. later, Y stole the note and indorsed and delivered it to D, who
acquired it in good faith. When D presented the note to A, A paid the note in good faith. As a result
a. The obligation of A is extinguished
b. C should collect from B
c. C can collect from A and if A will not pay, C can collect from B
d. C can collect from A but not from B
___51. Using the preceding number but the promissory note reds I promise to pay B or order P100,000. Sgd. A.
a. The obligation of A is extinguished
b. C should collect from B
c. C can collect from A and if A will not pay, C can collect from B
d. C can collect from A but not from
___52. Using the preceding number, but the promissory note reads I promise to pay B or bearer, P100,000. Sgd. A.
a. The obligation of A is extinguished
b. C should collect from B
c. C can collect from A and if A will not pay, C can collect from B
d. C can collect from A but not from B
___53. A issued a negotiable promissory note payable to bearer. He delivers the note to B. B indorsed the note especially
to C, then C negotiates the note by delivery to D. Which of the following is not correct?
a. D can enforce the note against C
c. D can enforce the note against A
b. D can enforce the note against B
d. C can enforce the note against B
___54. This is not a requisite of a valid acceptance for honor
a. There must be consent of the holder
b. The acceptor for honor is partly already liable on the instrument

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c. The acceptance for honor must be in writing and signed by the acceptor for honor
d. The bill must have been previously protested for non-acceptance or for better security
___55. M issued to P, accommodated party, a negotiable promissory note for P10,000. P endorsed it to A, A to B, B to C.
Which of the following is incorrect?
a. M can collect from P, if M will pay C
b. P may directly pay C
c. Between M and P, M is secondarily liable while P is principally liable
d. P can collect from M, if P will pay C
___56. M makes a negotiable promissory note in favor of P payable on December 25,2010 with the following successive
indorsements P to A, A to B, and B to C. On the due date, M is paying C, but C extends the payment up to December
25,2011. Which of the following is incorrect?
a. C may still enforce the instrument against M
b. If M becomes insolvent on December 25,2011, P, A and B are discharged from their obligation.
c. If the indorsers consented to the extension of time and M becoming insolvent on December 25,2011, the I
ndorsers are still liable.
d. If before December 25,2011, C cancels the signature of P as indorser, P, A and B and the instrument are
discharged.
___57. Omissions that do not affect the negotiability of an instrument, except
a. It is not dated.
b. Does not specify the value given
c. Does not specify the place where it is drawn
d. Does not name the payee where the instrument is payable to order
___58. Which of the following instruments is not negotiable for the treason that the instrument is not payable at a
determinable future time?
a. 30 days after demand, drawer A directs drawee B to pay C or order P10,000. Sgd. E.
b. 20 days after the death of R, I promise to pay to the order of B P10,000. Sgd C.
c. 10 days after A passes the CPA board exam, I promise to pay to the order of B P10,000. Sgd. C.
d. On or before February 28,2012, I promise to pay A or order P10,000. Sgd. B.
___59. X obtains the signature of Y for autograph purpose. X writes a negotiable promissory note above Ys signature.
The note was validly negotiated to Z who is a holder in due course. What kind of defense can Y avail against Z?
a. Personal defense
b. Real defense
c. Equitable defense
d. Qualified defense
___60. A issued a promissory note to the order of B for P10,000 payable on September 30,2010 in payment of a TV set
sold by B to A. B failed to deliver the TV set to A and instead transferred the note to C for value but without indorsement.
Which of the following is correct?
a. C is deemed a holder for value when B transferred the note to him
b. C becomes a holder in due course when B indorsed the note to C on October 9,2010
c. C has no right to compel B to make the proper indorsement to him
d. C cannot collect from A because As defense of lack of consideration
___61. M issues a promissory note payable to P or bearer. If P indorses the note to A, which of the following is correct?
a. A must also indorse to negotiate the note
b. If A merely negotiates by delivery to B, P is liable to B because of his indorsement to A
c. If A merely negotiates by delivery to B, B becomes a holder even if P indorsed it to A
d. The instrument is converted to an order instrument
___62. Which of the following statements is not correct?
a. Where the instrument is payable on demand and it is negotiated after an unreasonable length of time after its
issue, the holder is not a deemed a holder in due course
b. A holder in due course is a holder for value
c. A holder for value may not be a holder in due course
d. An accommodation party is liable to holder for value only is such holder at the time of taking the instrument is
not aware that he is only an accommodation party
___63. Negotiation as distinguished from assignment
a. Refers generally to an ordinary contract
c. Transferee is a holder
b. Does not warrant the solvency of the prior parties
d. Subject to both real and personal defenses
___64. A issued a negotiable promissory note to the order of B for P10,000 payable in 30 days after date. Later B
endorsed the note to C. Then X stole the note from C, forged the signature of C and negotiated it to D, and D to E, E to F,
the holder. On maturity of the note, which of the following statements is not correct?
a. F can collect from either D or E because their signatures are genuine and the note is operative against them
b. F can collect A because A cannot put up forgery as his defense as his signature is genuine
c. F cannot collect from C because it was Cs signature which was forged
d. F cannot collect from B because B is a party prior to the forgery

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___65. Which is not correct? The acceptor by accepting a negotiable instrument

a. Admits the capacity of the payee to endorse
b. Admits the genuineness of the drawers signature
c. Admits the genuineness of the endorsers signature
d. Admits that he will pay it according to the tenor of his acceptance
___66. I promise to pay B or order P100,000 one month after Bs father died. Sgd. A. The instrument is
a. Negotiable from the time Bs father dies
c. Non-negotiable because payment is indefinite
b. Subject to a condition
d. Payable at a determinable future time
___67. What are the effects of indorsement after maturity?
I. There is assignment and not negotiation.
II. The holder cannot be deemed a holder in due course.
a. True, True
b. True, False
c. False, True
d. False, False
___68. A promissory note reads I promise to pay B or order P100,000. Sgd. A. Then B made a qualified indorsement to
C. On maturity, A dishonors the instrument due to his insolvency. As a result,
A. C can collect from B, if he is a holder in due course
B. C can collect from B, regardless of whether or not he is a holder in due course
C. C cannot enforce the instrument against B
a. A only
b. B only
c. C only
d. A and B
___69. Using the preceding number, if A dishonors the instrument due to forgery, that his signature has been forged by B,
the effect is:
A. C can collect from B, if he is a holder in due course
B. C can collect from B, even if he is not a holder in due course
C. C can collect from B, regardless of whether or not he is a holder in due course
a. A only
b. B only
c. C only
d. A, B and C
___70. A issues a bill payable to the order of B. Later B without endorsing the bill transfers for a consideration said bill to
C. The following, except one, are the valid effects of the transfer. The exception is
a. C becomes a holder
b, C acquires the rights to have the indorsement of B
c. The transfer vests in C such title as B had thereon
d. The bill is merely assigned and not negotiated
___71. Where an indorsement is conditional, may the maker of a negotiable promissory make payment although the
condition has not been fulfilled?
a. Yes he may disregard the condition without incurring any liability
b. Yes he may disregard the condition but he becomes liable if the endorsee fails to fulfill the condition
c. No the qualified indorsement becomes part of the contract
d. No the person who received payment will hold the proceeds subject to the right of the conditional indorser
___72. M issues a promissory note payable to B or bearer. Which of the following is not correct?
a. If indorsed by P to A and A also indorses it to B, B may negotiate and the note to C by delivery
b. If indorsed by P to A and A also indorses it to B, P is liable to A and B
c. If indorsed by P to A and A also indorses it to B, and B negotiates the note to C by delivery. A is liable to B and
C.
d. If P negotiates the note to A by delivery and A indorsers it to B, B may negotiate the note to C by delivery.
___73. Which of the following is not correct?
a. Where the instrument is negotiated back to a prior party, all intervening indorsements are not necessary to the
holders title.
b. Where the instrument is originally payable to order, the holder may not strike out the payees indorsement.
c. The indorser whose indorsement is struck out and all indorsers are thereby relieved from liability on the
instrument.
d. The holder may at anytime strike out an indorsement which is not necessary to his title.
___74. A bill of exchange as distinguished from a promissory note
a. The one issuing the instrument is primarily liable
b. Acceptance of the instrument is not required
c. Original parties are the maker, and the payee or bearer
d. Contains an unconditional order
___75. A issued a negotiable promissory note payable to bearer. He delivers the note to B. B indorsed the note especially
to C, and then C negotiates the note by delivery to D. Which of the following is correct?
a. D can enforce the note against C and B
c. D can enforce the note against A and C

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b. D can enforce the note against B and A

d. D can enforce the note against B and D

___76. A issued a promissory note payable to B or order for P10,000 for 10 bottles of whisky sold by B to A. Later B
negotiated the note to C. Subsequently, A discovered that only 5 bottles of whisky are genuine. As a result
a. C can enforce the note against A for P10,000 regardless of whether C is holder in due course or not
b. C cannot enforce the note against A for P10,000 even if he is a holder in due course
c. C can enforce the note against A only for P5,000 regardless of whether is a holder in due course or not
d. C can enforce the note against A only for P5,000 if he is not a holder in due course
___77. A makes a negotiable note to bearer and delivers it to B for safekeeping. The note is negotiated by B to C. Can A
refuse to pay C on the ground that the note was originally delivered to B for a special purpose only?
a. Yes , A can prove that he delivered the instrument to B only for a special purpose
b. No where the instrument is in the hands of any holder, a valid delivery thereof by all parties prior to him so as to
make them liable to him is conclusively presumed
c. Yes because B negotiated the note without authority
d. No if C is a holder in due course
___78. A made a negotiable promissory note in favor of B or order who negotiated it to C under the following
indorsements. Pay to C after passing the CPA examination in October 2011. C presented it to A for payment and it was
duly paid, D did not pass the CPA examination. Which of the following is correct?
a. The promissory note is not negotiable because of the condition imposed
b. The promissory note becomes void because the condition was not satisfied
c. A had no right to pay C and therefore can be compelled to pay again
d. A may disregard the condition and make payment whether the condition is fulfilled or not
___79. When the instrument is complete and undelivered, delivery is presumed to have been made in favor of the holder,
the presumption is
a. Conclusive whether holder in due course or for value
b. Prima-facie whether holder in due course or for value
c. Conclusive if holder for value and prima facie of holder in due course
d. Prima-facie if holder for value and conclusive if holder in due course
___80. The following are functions of a negotiable instrument, except
a. It increases credit circulation
c. As legal tender
b. As substitute for money
d. In increases purchasing power in circulation
___81. Which of the following does not discharge a negotiable instrument?
a. Intentional cancellation of the instrument by the holder
b. Payment by the party primarily liable to holder or his authorized representative
c. Payment by maker of a promissory note before maturity date
d. Voluntary surrender of the instrument by the holder to the maker without collecting
___82. A bill of exchange to which document is attached when presentment for payment or acceptance is made
a. Trade acceptance
b. Bank acceptance
c. Clean bill of exchange
d. Documentary bill of exchange
___83. A transfer of negotiable instrument where the holder of the instrument dies and his title thereto is transferred to his
heirs or personal representative is
a. By assignment
b. By negotiation
c. By operation of law
d. By accommodation
___84. The effect of a forged signature or one made without authority of the person whose signature it purports to be,
except
a. The instrument is wholly inoperative
b. No right tor retain the instrument
c. No right to give a discharge therefore
d. No right to enforce payment through or under such signature can be required
___85. The writing of the name of indorser on the instrument itself or upon a paper attached thereto in evidence of his
transaction of the title to it, or of his assuring its payment or both.
a. Allonge
b. Forgery
c. Signature by procuration
d. Indorsement
___86. Indorsement made by a person not otherwise a party to the instrument, who places therein his signature in blank
before delivery.
a. Blank
b. Special
c. Facultative
d. Irregular
___87. Indorsement where the indorser enlarges his liability by waiving the usual demand and notice of dishonor.
a. Qualified
b. Facultative
c. Restrictive
d. Conditional
___88. Which of the following is a restrictive endorsement, pay to J?
a. In trust for E, Sgd. M.
c. At his own risk. Sgd. E
b. If he passes the CPA examination, Sgd. E.
d. Notice of dishonor waived. Sgd. E

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___89. This is negotiation as distinguished from assignment

a. The transfer is subject to both real and personal defenses
b. The transferor does not warrant the solvency of prior parties
c. The transferee may acquire a title bearer than that of the prior party
d. The transferor is liable even without the notice of dishonor
___90. An alteration committed by a stranger to a negotiable instrument is
a. Policitacion
b. Spoliation
c. Option contract
d. Material alteration
___91. This is not a restrictive indorsement
a. Pay to A for collection
c. Pay to A at his own risk
b. Pay to A only
d. Pay to A in trust for B
___92. It contains an order to pay out of a particular fund rendering the instrument beyond the scope of the negotiable
instrument law
a. Bill of lading
b. Treasury warrant
c. Certificate of stock
d. Warehouse receipt
___93. The indorser who simply signs his name renders himself liable to all subsequent holders as
a. Primarily liable
b. Solidarily liable
c. Secondarily liable
d. Subsidiarily liable
___94. There is no difference between a holder in due course and one who is not, since as regards them, real and
personal defenses may always be raised if
a. Intervening parties b. Remote parties
c. Immediate parties
d. Subsequent parties
___95. A holder in due course has the following rights, except
a. He holds the instrument free from defects of title of prior parties
b. Free from defenses of prior parties among themselves
c. Enforce payment against all parties liable thereon
d. Holds the instrument as if it were non-negotiable
___96. Which of the following is not negotiable instrument?
a. Pay to the order of Pedro Cruz P1M (Sgd) Jose Santos. To A or B.
b. I promise to pay to the order of the bearer P1M. (Sgd) M.
c. Due to Bearer P1M or a BMW car worth P1M at his option. (Sgd) M
d. Pay to the order of myself P1M. (Sgd) D to: W.
___97. Three of the following are the requisites to be a holder in due course, except
a. That the instrument is complete and regular upon its face
b. That the holder took it in good faith and for value
c. That he became the holder of if before it was overdue and without notice that it had been previously dishonored
if such was the fact.
d. That he had no knowledge of any fact which would impair the validity of the instrument or render it valueless.
___98. The negotiable instrument is not discharged
a. When the principal debtor becomes the holder thereof before, at or after maturity in his own behalf
b. By the intentional cancellation of the instrument
c. By payment in due course by the accommodated party
d. By any other act which discharges a simple contract for the payment of money
___99. An instrument that is payable to a specified person or entity is
a. Negotiable because it complies with Section 1 of the law
b. Not negotiable because it must be payable to order or bearer
c. Negotiable because a specified person is a payee or drawee
d. Not negotiable because the payee is named
___100. An instrument is payable to bearer, except
a. The only or last indorsement is in blank
c. It is payable to a specified person or bearer
b. Payable to cash
d. Payable to the order of a specified person
___101. Where an incomplete instrument has not been delivered, it will not, if completed and negotiated without authority,
be a valid contract as against any person whose signature was placed thereon before delivery in the hands of a
a. Holder in due course
b. Holder not in due course
c. Holder for value
d. Any holder
___102. Every negotiable instrument is deemed prima facie to have been issued for a valuable
a. Reason
b. Consideration
c. Contract
d. Money or property
___103. Absence or failure of consideration is a matter of defense as against any person who is
a. Holder in due course
b. Not a holder in due course
c. Holder for value
d. Not holder for value
___104. A paper attached to a negotiable instrument where endorsements may be made
a. Allonge
b. Dorsal or back portion of instrument c. Face of instrument d. All of the above
___105. A bill of exchange is rendered non-negotiable if
a. It is payable out of a particular fund
b. There is an indication of a particular fund out of which reimbursement is to be made
c. There is an indication of a particular account to be debited with the amount paid

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d. Answer not given

___106. This does not constitute negotiation of an instrument.
a. Delivery of a bearer instrument
b. Indorsement completed by delivery of a bill payble to order
c. Assignment
d. Delivery of an instrument to the payee
___107. Person not a party to a negotiable instrument
a. Acceptor
b. Drawer
c. Assignor
d. Endorser
___108. Which of the following is not a personal defense?
a. Absence of consideration
c. Forgery of a signature
b. Non-delivery of a complete instrument
d. Failure of consideration
___109. Which of the following is not a real defense?
a. Incomplete and undelivered instrument
c. Material alteration
b. Forgery
d. Fraud in inducement
___110. An instrument is payable on demand when
a. Expressed to be payable on determinable future time c. Time for payment is expressed
b. After sight or presentation
d. Issued overdue
___111. Which of the following is for deposit only?
a. Crossed check
b. Stale check
c. Forged check
d. Managers check
___112. Where the holder of a check procures it to be certified, the following is discharged:
a. Drawer
b. Indorser
c. Drawer and indorser d. None of the above
___113. A bill of exchange drawn on a bank and payable on demand is
a. Check
b. Treasury bill
c. Domestic bill
d. Bill of lading
___114. Maturity of an undated promissory note issued payable 30 days after sight is computed from
a. Date of first indorsement
c. Date of first presentation for acceptance
b. Date of last indorsement
d. Date of issue
___115. When a negotiable instrument payable to order?
a. When payable to the order of a specified person or to him or his order
b. When payable to the order of a fictitious person or non-existing person and such fact was known to the person
making it so payable.
c. When the name of the payee does not purport to be the name of a person.
d. When the only or last indorsement is in blank.
___116. Which of the following is not secondarily liable?
a. Drawer
b. Indorser
c. Payor for honor
d. Acceptor for honor
___117. The following instances when a bank may refuse to honor a check drawn against it, except one:
a. Drawer has countermanded payment
b. Drawers insufficient funds
c. Drawer has become insolvent
d. Bank obtains knowledge of drawers death
___118. An irregular indorser as distinguished from a genral indorser:
a. He becomes the guarantor of the primarily liable party
b. He is not a party to the instrument but signs to add credit to the instrument
c. He is a regular party to the instrument and signs upon delivery of the instrument
d. He signs the instrument for valuable consideration
___119. Which of the following is a negotiable instrument?
a. Letter of credit
c. Certificate of time deposit
b. Treasury warrant
d. Postal money order
___120. The following instances when a bank may refuse to honor a check drawn against it, except one:
a. Drawer has countermanded payment
b. Drawers insufficient funds
c. Drawer has become insolvent
d. Bank obtains knowledge of drawers death

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