Professional Documents
Culture Documents
An indorsement where the indorser signs only his name at the back of the instrument
is a:
a. special indorsement.
b. blank indorsement.
c. qualified indorsement.
d. restrictive indorsement.
19. An indorsement where the indorser waives the benefit of any law intended for his
protection is known as:
a. an absolute indorsement.
b. a facultative indorsement.
c. a conditional indorsement.
d. a successive indorsement.
b. To hold the instrument free from personal defenses available to prior parties among
themselves.
c. To enforce payment of the instrument for the full amount thereof against all parties
liable thereon.
d. To hold the instrument free from real defenses available to the prior parties
among themselves.
23. M executed a note payable to the order of P. P indorsed the note to A, A to B (by
qualified indorsement), B to C (by general indorsement), and C (by general indorsement)
to H, a holder in due course. Later, it was discovered that P was a minor. None, except
P, knew that he was a minor. Who, aside from P, may avail himself of the minority of P
as a defense?
a. M, maker.
b. A, qualified indorser.
c. B, general indorser.
c. When the principal debtor becomes the holder in his own right before maturity.
a. Treasury warrant
b. Postal money order
c. Letter of credit
d. Trade acceptance
I promise to pay to the order of Paolo Pimentel the sum of P50, 000.00 if he places
first in the May 2011 CPA Examination.
I promise to pay to the order of Patrick Pelaez the sum of P50, 000.00 sixty (60) days
after date.
The instrument was delivered by Minerva Maceda on December 1, 2010 to Patrick Pelaez
who indorsed and delivered the note on the same day to Alberto Antonio. Immediately
upon receipt, Alberto Antonio wrote on the note “November 1, 2010” as its date of issue.
The following day, Alberto Antonio indorsed and delivered the note to Herman Hernandez
who knew nothing with respect to the insertion of a different date of issue.
a. Herman Hernandez can collect the amount of the note from Minerva Maceda
on December 31, 2010.
b. Herman Hernandez can collect the amount of the note from Minerva Maceda on
January 30, 2011.
c. Herman Hernandez can collect nothing from Minerva Maceda because of the
insertion of a wrong date.
d. Herman Hernandez can collect the amount of the note on December 2, 2010 when
it was negotiated to him.
November 1, 2010
I promise to pay to the order of Perla Persida the sum of P30, 000.00 on November 30, 2010.
On November 30, 2010, Perla Persida may collect from Melba Montinola:
a. P30,000.00
b. P20,000.00
c. P10,000.00
d. Nothing, because the note is void since it reads “I promise to pay” but it was signed
by three makers.
30. At a movie premier, Perfecto Palmares approached Sharon Morales, the star of the
movie, and requested an autograph from her. Sharon Morales willingly obliged and signed
her name at the bottom right portion of a white 8” x 11” stationery which Perfecto Palmares
presented to her. Shortly after reaching home, Perfecto Morales printed above the
signature of Sharon Morales through his computer the following: “I promise to pay
Perfecto Palmaresof his order P50, 000.00”. Thereafter, Perfecto Palmares negotiated
the paper to Arturo Alvarez, Arturo Alvarez to Bernardo Benitez, and Bernardo Benitez to
Henry Hilado, holder. Alvarez, Benitez, and Hilado knew nothing about how the apparent
note came into being.
a. If he is a holder in due course, Henry Hilado can collect from Sharon Morales.
b. Whether he is a holder in due course or not, Henry Hilado cannot collect from
Sharon Morales.
c. Whether he is a holder in due course or not, Henry Hilado cannot collect from
Arturo Alvarez.
d. Whether he is a holder in due course or not, Henry Hilado cannot collect from
Bernardo Betinez.
31. M makes a promissory note payable to the order of P for P10, 000.00. P indorses the
note to A, and A to B. Thereafter, B indorsed the amount of the note in full to H to secure
his (B’s) debt of P8, 000.00 to H. Based on the foregoing, which of the following
statements is incorrect?
33. Which of the following omissions on the face of an instrument will render it non-
negotiable?
34. Medardo Medrano makes a note payable to the order of Pidencio Palomar and
Prudencio Perez for P20,000.00. The payees are not partners and neither one
authorized the other to act in his behalf. Based on the foregoing, which of the following
is a valid indorsement?
Note: Medardo Medrano has not paid any amount to the payees.
d. “Pay to Antonio Arevalo P20,000.00.
35. Which of the following may be raised as defense against any holder?
a. Want of consideration.
c. A qualified indorsement.
d. A conditional indorsement.
37. M makes a promissory note for P10,000.00 payable to the order of P for merchandise
to be delivered by P to him. P, however, was able to deliver to M merchandise worth
P8,000.00 only. P indorsed the note to A, and A to H.
39. Mary Montes and Melany Manalo obtained a loan of P100,000.00 from Patricia Palma.
The debtors executed a promissory note which reads as follows:
To secure the loan, Mary Montes pledged her diamond ring, while Melany Manalo
executed a mortgage on her lot.
a. Mary Montes may demand the return of her diamond ring if she pays her
share of the debt, while Melany Manalo’s shares remains outstanding.
b. Melany Manalo may demand the cancellation of the mortgage on her lot if
she pays her share of the debt, while Mary Montes’s share remains
outstanding.
c. Both Mary Montes and Melany Manalo must pay the total amount of
the debt before Mary Montes could demand the return of the diamond
ring, and Melany Manalo the cancellation of the mortgage on her lot.
40. M executed a promissory note in the amount of P20,000.00 payable to the order of P.
M made the promissory note for goods purchased by M from P shortly after M obtained
the consent of P whether the latter would accept the promissory note in the meantime.
When P visited M’s office to collect the note, M was not around, but P found on M’s
table the completed note that M made for him. Without waiting for M, P took the note.
Based on the foregoing which of the following statements is incorrect?
b. If P indorses the note to H who knows nothing on how P obtained the note,
H can collect on the note from M.
c. If P indorses the note to H who knows how P obtained the note from M, H
cannot collect from M.
I. “Pay to the order of Pablo Patricio P20,000.00 in goods which are displayed at
your store.”
II. “Pay to the order of Pablo Patricio P20,000.00 or deliver to him a computer of the
same value at his option.”
43. The attribute of a negotiable instrument which allows it to be passed from one hand
to another similar to money, so as to give a holder in due course the right to hold the
instrument free from defect of title of prior parties, and free from defenses available to
prior parties among themselves, and to enforce payment of the instrument for the full
amount thereof against all parties liable thereon is known as:
a. Assignability
b. Negotiability
c. Transferability
d. Acceptability
44. An instrument is not payable on demand in one of the following cases. Which case is
it?
I. Where the sum payable is expressed in words and also in figures and there is a
discrepancy between the two, the sum denoted by the words is the sum payable.
II. Where there is a conflict between the written and the printed provisions of the
instrument, the printed provisions prevail.
January 1, 2011
Pay to the order of Pamela Pineda the sum of P 50, 000.00 thirty (30)
days after sight.
The above bill was issued by Rosita Rodriguez to Pamela Pineda on December 28,
2010 and was presented for acceptance by Pamela Pineda to Wilma Warner on
January 10, 2011.
Based on the foregoing facts, the maturity date of the bill is:
a. January 27,2011
b. January 31, 2011
c. February 9, 2011
d. January 10, 2011
47. Ramos draws a bill of exchange payable to the order of Palma. Palma presents
the bill to Wagan, drawee, for acceptance and the latter accepts it. Thereafter, Palma
indorses the note to Alunan, Alunan to Bernarte, Bernarte to Hornedo, holder. On due
date, Hornedo presents the bill to Wagan for payment but Wagan dishonors it claiming
that Palma is a minor. Wagan, Ramos, Alunan and Bernarte claim that they did know
that Palma was a minor at the time that they transacted on the instrument. Aside from
Palma, who may claim the defense of minority?
a. Ramos
b. Wagan
November 1, 2010
The above promissory note was delivered by Maria Montano to Paloma Perez who
made the following indorsement at the back of the promissory note:
49. The acceptor, by accepting the instrument, admits the following, except the:
50. M makes a promissory note payable to the order of P and delivers the same to P.
P indorses the note to A who keeps it in his drawer. F steals the note and
negotiates the same to B by forging A`s signature. Thereafter, B negotiates the
notes to C, C to D, and D to H, a holder in due course. Based on the forgoing
information, which of the following statements is true?
a. H can hold M and P liable because they became bound under the instrument
before the forgery.
b. H cannot hold B, C, and D liable because they have no participation whatsoever
in the commission of the forgery.
c. H can enforce the instrument only against F, the forger, since he is the
perpetrator of the forgery.
d. H can enforce instrument against F, B, C and D, but not against M, P and
A.
51. The acceptor, by accepting the instrument, admits the following, except the:
a. existence of the payee.
b. capacity of the payee to indorse.
c. genuineness of the drawer`s signature.
d. right of the holder to enforce payment of the instrument.
52. Which of the following may be raised as a defense against any holder?
a. Want of consideration.
b. Want of delivery of complete instrument.
c. Insertion of a wrong date.
d. Want of delivery of an incomplete instrument.
I promise to pay to the order of Perla Persida the sum of P30,000.00 on November
30, 2015.
(Sgd.) Melba Montinola (Sgd.) Milnore Manuel
(Sgd.) Maila Medina
On November 30, 2015, Perla Persida may collect from Melba Montiola:
a. P 30,000.00
b. P20,000.00
c. P10,000.00
d. Nothing, because the note is void since it reads “I promise to pay” but it was
signed by three makers.
54. Assuming all the other requirements of negotiability are present, which of the
following instrument is not payable to bearer?
a. “Pay to the order of Cash.”
b. “Pay to the order of Jose Rizal, national hero.”
c. “Pay to Pedro Padernal, bearer”
d. “Pay to Pedro Padernal or bearer”
56. The signification by the drawee of his assent to the order of the drawer.
a. Acceptance
b. Approval
c. Recommendation
d. Indorsement
(Sgd.) M
60. Which of the following defenses may a party to an instrument avail himself of
against any holder?
a. Want of delivery of incomplete instrument.
b. Want of authority to complete an instrument that was delivered.
c. Want of delivery of complete instrument.
d. Want or absence of consideration.
61. M makes a promissory note payable to the order of P for PHP5,000.00. After
delivery to P, P changed the amount to US$5,000.00. Thereafter, P indorsed the
note to A, A to B, B to C, C to D, and D to H. The parties subsequent to P were
not aware of the alteration made by P. Based on the foregoing facts, which of the
following statements is incorrect?
a. H can hold M liable for US$5,000.00 if H is a holder in due course.
b. H can hold M liable for PHP5,000.00 if H is a holder in due course.
c. H cannot hold M liable for any amount is H is not a holder in due course.
d. H can hold A, B, C, and D liable for US$5,000.00 even if H is not a holder in due
course.
62. A holder is a holder in due course if he has taken the instrument complete and
regular on its face and three of the following conditions, except:
a. That he became the holder of the instrument before it was overdue and without
notice that it had been previously dishonored if such was the fact.
b. That he took it in good faith and for value.
c. That there is no fraud or illegality affecting the instrument.
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 the same.
63. Marilou Mateo executed a promissory note in favor of Patria Plata as follows:
“I promise to pay Patria Plata or order P50,000.00 or to deliver to her a brand
new laptop computer.”
64. M executes a promissory note for P10,000.00 payable to the order of P, a minor.
M and P had a private understanding that M is liable only for the discounted
amount of P9,500.00. P indorsed the note to A, A to B, B to C, C to D, and D to
H, holder.
a. M may refuse to pay H on the ground that P is a minor.
b. If M dishonors the note, A may refuse to pay H on the same ground that P is a
minor.
c. The indorsement made by P passed title to the instrument in favor of A.
d. Assuming that P was already of the age of majority at the time of the execution of
the note, M is liable to H for P9,500.00 since that was the amount that he agreed
with P that he should pay.
65.On August 1, 2015, M executed a promissory note for P50,000.00 payable to the
order of P which is payable “30 days after date.” Thereafter, P indorsed the note to A, A
to B, B to C, C to D, and D to M. The indorsement by D to M on August 29,2015.
I. M is insolvent
II. P is a minor
If C were a qualified indorser, which of the foregoing independent facts will not affect his
liability (i.e., he will still be liable) although he was not aware of any of them?
a. I and II
b. II and III
c. I and III
d. I, II and III
67. Refer to the preceding number. Assuming that C were a general indorser, which of
the foregoing facts enumerated (I, II and III) will not affect his liability (i.e., he will still be
liable) although he was not aware of any of them?
a. I and II
b. II and III
c. I and III
d. I, II and III
68. One of the distinctions between negotiation and assignment of a negotiable
instrument is that in assignment the:
a. H may not collect any amount, whether of the principal or of the interest, from M.
b. H may collect P100,000.00 and interest at 10% per annum from M.
c. H may collect P100,000.00 and interest at 18% per annum from M.
d. H may not collect any amount, whether of the principal or of the interest, from A,
since A was not aware of the alteration.
71. Manuel Miranda wrote a letter to his goddaughter which reads as follows:
To Pilar Perez:
Dear Pilar:
I am formally making the promise I have made earlier to you to pay you or
your order P500,000.00 or a brand new Toyota Corolla Altis, at your option, as
soon as you graduate.
Your Godfather,
72. M made a promissory note payable to P or bearer. After its delivery to him, P
indorsed the note to A. While the note was in the possession of A, F stole the note and
negotiated it to B by forging A’s signature. Thereafter, B indorsed the note to C, C to D,
and D to H, a holder in due course. Which of the following defenses are available to M,
P and A against H?
II. Want of delivery of the note by A since the note was stolen from him.
II.
a. Both instruments are negotiable in origin but ceased to be negotiable at the time
of indorsement.
b. Both instruments are non-negotiable in origin.
c. Only instrument I is negotiable in origin but ceased to be negotiable at the time of
indorsement.
d. Only instrument II is negotiable in origin but ceased to be negotiable at the
time of indorsement.
74. M issued a promissory note payable to the order of P for P50,000.00. Thereafter, P
indorsed the note to A. While the note was in the possession of A, F stole it and negotiated
it to B by forgiving the signature of A. B was not aware of the forgery of A’s signature. B
then indorsed the note to H, a holder in due course. The parties who may raise forgery
as a defense are:
a. A and B
b. M and P
c. M, P and A
d. none of the parties may raise forgery as a defense because H is a holder in due
course
75. Refer to the preceding number. Assume the same facts except that the note is payable
to bearer. In such a case, the parties who may raise forgery as a defense are:
a. A and B
b. M and P
c. M, P and A
d. none of the parties may raise the defense of forgery
76. M makes a promissory note for P10,000.00 payable to the order of P. After the
issuance to him of the note, P altered the amount to US$10,000.00. P then indorsed the
note to A, A to B, and B to H. Only P knew of the alteration.
I. M, P10,000.00
II. M, US$10,000.00
III. M, nothing
IV. A and B, P10,000.00
V. A and B. US$10,000.00
VI. A and B, nothing
If H is a holder in due course, the parties from whom he may collct and the amount of the
said parties’ liability are:
a. I and IV
b. II and V
c. I and V
d. III and VI
a. Does not require the drawer to have funds with the drawee
b. May be drawn against a person other than a bank
c. Is always payable on demand
d. Is required to be presented for acceptance in certain cases
78. The placing of a date in an instrument is necessary in the following cases, except:
a. He received the instrument after it has become overdue but he has no knowledge
of it
b. He received the instrument after it was dishonored and he has no notice of
such dishonor
c. He did not give any value of it
d. The instrument was not complete and regular on its face
80. On May 1, 2015, Manolo Montes executed the following promissory note for goods
he purchased from Peter Perez:
(No date)
I promise to pay Peter Perez or order the sum of P20,000.00 with interest, thirty days after date,
in payment of the goods I purchased from him today. To secure the amount of this note, I hereby pledge
my ring which I authorize Peter Perez to sell in case of my default on due date.
The part of the above instrument that renders it non-negotiable is the phrase or statement:
81. Medardo Medrano has an obligation to give 10 sacks of rice worth P10,000.00 to
Pancho Panza, the same being due on September 5, 2015. Medardo Medrano failed to
deliver 10 sacks of rice to Pancho Panza on due date despite the latter’s demand.
Medardo Medrano requested Pancho Panza to give him a period of 30 days to give the
amount of P10,000.00 or to deliver 10 sacks of rice, assuring Pancho Panza of the
payment by issuing the promissory note shown below. Pancho Panza agreed to Medardo
Medrano’s proposal.
September 6, 2015
I promise to pay Pancho Panza or order the sum of P10,000.00 or to deliver him 10sacks of
rice.
82. The following are certain conditions in an instrument or the transfer thereof:
I. A condition placed on the face of the instrument that the maker will pay it to
the payee upon the fulfillment of the condition.
II. A condition placed on an indorsement that the instrument will be paid upon
the fulfillment of the condition.
III. A condition placed upon the delivery of the instrument, such as when the
maker delivers the note to the payee and instructs him not to negotiate the
instrument until the maker obtains the proceeds of his loan.
In your evaluation of the above statements, the instruments that are negotiable or
remain negotiable despite the presence of the condition mentioned are:
a. I and II.
b. II and III.
c. I and III.
d. I, II and III.
83. This promissory note was issued by Maila Moreno to Patricia Pineda on August 1,
2015:
August 1, 2015
I promise to pay Patricia Pineda or order the
sum of
P20,000.00 thirty (30) days after
date.
(Sgd.) Maila
Morena
The note was thereafter indorsed by Patricia Pineda to Alma Alajar, Alma Alajar to
Brenda Bermejo, and Brenda Bermejo to Carmela Castro. On August 30, 2015,
Carmela Castro indorsed the note as follows:
(Sgd.) Carmela
Castro
a. The promissory note was extinguished when Maila Morena became the holder.
b. The promissory note was not extinguished when Maila Morena became the
holder.
c. Maila Morena may not renegotiate the instrument after it was indorsed to her.
d. Maila Morena may go after Patricia Pineda, Alma Alajar, Brenda Bermejo and
Carmela Castro.
84. Refer to the preceeding number. Assuming that the note was extinguished when it
was indorsed by Carmela Castro to Maila Morena, the cause of the extinguishment is:
a. Confusion.
b. Condonation.
c. Compensation.
d. Novation.
85. The following are defenses in a negotiable instrument:
a. I and II only.
b. II and III only.
c. I and III only.
d. I, II and III.
86. Which of the following indorsements is a valid negotiation of the instrument?
a. Acceptance
b. Approval
c. Recommendation
d. Indorsement
89. The acceptance that takes place when a drawee to whom a bill is delivered for
acceptance destroys the bill the bill, or refuses within 24 hours after such delivery, or
within such other period as the holder may allow, to return the bill accepted or non-
accepted, to the holder.
a. Implied acceptance
b. Qualified acceptance
c. Constructive Acceptance
d. Oral Acceptance
90. The following are the requisites of actual acceptance of a bill of exchange, except:
a. It must be in writing.
d. It must express that the drawee will perform his promise by the payment of
money, the delivery of a thing or the rendering of some service.
I. The holder of a bill may require that the acceptance be written on the face of the
bill, and if such request is refused, he may treat the bill as dishonored.
I. The holder may refuse to take a qualified acceptance, and if he does not obtain an
unqualified acceptance, he may treat the bill as dishonored by non-acceptance.
II. As a rule, a qualified acceptance taken by the holder will discharge he drawer and
endorsers.
a. 12 hours
b. 24 hours
c. 48 hours
d. 72 hours
II. A bill cannot be accepted after it has been previously dishonored by a refusal to
accept, or by non-payment.
a. Where the bill is payable after sight, or in any other case, where presentment for
acceptance is necessary to fix the maturity of the instrument.
b. Where the bill expressly stipulates or provides that it shall be presented for
acceptance.
c. Where the bill is drawn payable elsewhere that at the residence or place of business
of the drawee.
d. Where the bill is drawn payable elsewhere than at the residence or place of
business of the drawer.
100. A formal written statement made by a notary public at the request of a holder of
bill of exchange stating that he has demanded acceptance or payment of the
bill, and that it has been refused, with the reasons, if any, given by the
drawee or acceptor for the dishonor.
a. Certification
b. Demand letter
c. Protest
d. Affidavit
104. An acceptance for honor which does not expressly state for whose honor it is
made id deemed to be for the honor of the:
a. drawee.
b. drawer.
c. acceptor.
d. payee.
I. A bill in set is one composed of several parts, each set being numbered
and containing a reference to the other parts.
II. In a bill in set, the number of bills depends upon the number of parts;
hence, if there are four parts, there will be four separate bills.
106. R, drawer; W, drawee. The bill is payable to the order of P for 10,000. Assume
the following independent acceptances by W.
A. I only
B. II only
C. Both I And II
D. Neither I nor II
107. P is the payee of a check on which two diagonal parallel lines appear on the upper
left portion of the check. R is the drawer; W bank is the drawee bank. P has savings
account in C Bank where he regularly deposits checks and cash given to him as
payment. What may P do with the check so that he can receive payment thereon?
108. R draws a check forP100,000.00 payable to the order of P and against his deposit
of P2000000 at W bank. The check is indorsed by P to H, holder. H delays the
presentment of the check to W bank. By the time he presents it for payment, W bank is
already insolvent. R is able to recover P 500,000.00 from the Philippine Deposit
Insurance Corporation on his deposit. Will R still be liable to H?
D. No. R will no longer be liable because H’s delay in presenting the check for
payment totally discharged him form liability on the check.
109. Refer to the preceeding number. May H go afeter P, the party who indorsed the
check to him?
I. A check is payable on demand although such fact is not stated on its face.
II. A check that is post dated can be deposited even before the date indicated
thereon since a check is always payable on demand.
C. the dishonor of a post dated check when it is presented before the date
appearing thereon makes the drawer criminally liable
D. A post dated check may be cashed with the bank against which it is drawn
before the date indicated thereon.
112. R drew a check against his account with W bank payable to the order of P for 20,
000.00 F stole the check, forged P’s signature, and deposited the check in his account
with C bank. After clearing, F withdrew the amount of the check and fled. Who among
the following will shoulder the loss ?
A. R
B. P
C. W bank
D. C bank
113. On October 1, 2015, R bought goods from the store of P amounting to 10 000.00,
issuing a check for 20,000.00 against his account with W bank. R knew that his fund
with W bank was insufficient to cover the check. Consequently, the check was
dishonored by W bank when P presented it for encashment. What offense may be
charged against R?
C. Both a and b
D. Neither a and b
114. The following are some causes of discharge of a prior party to an instrument.
I. Discharge of a prior party because the holder failed to give him a notice of
dishonor.
III. Discharge of a prior party because he was released for value by the
holder.
a. I and II
b. II and III
c. I and III
d. I, II and III
115. M is the maker of a promissory payable to the order of P which is payable 30 days
after date. The note dated August 1, 2014 was issued on the same day by M to P. P
indorsed the note to A, A to B, and B to H. On August 31, 2014, H renounced
unconditionally his claim on the note against M who accepted the renunciation.
Nonetheless, H still negotiated the note on the same day to X who had no knowledge of
the renunciation. May X still collect on the note from M and parties subsequent to M?
116. P, by means of fraud, induced M to issue a promissory note payable to the order of
P for P21,000.00 The note was indorsed by P to A, and A to H. A and H had agreed to a
consideration of P20,000.00 (or a discount of P1,000.00). Initially, H gave A the amount
of P18,000.00. Before he could give the balance of P2,000.00 to A, H learned that P’s
title was defective. Is H a holder in due course?
120. Which of the following is a common liability of the drawer, maker and acceptor?