WESTMEAD INTERNATIONAL SCHOOL

School of Economics, Business and Accountancy

Law on Negotiable Instruments, 1st Semester AY 2014-2015
Finals Examinations

NAME: KATHLEEN JOY C. MORALES RATINGS____________

Read the following statements. Indicate your answer by writing the letter of your choice Any form of erasures will invalidate your answer for
that particular number.
1. Where the person not otherwise a party to the instrument places thereon his signature in bank before delivery he is liable as indorser and f
the instrument is payable to the order of a third person,
a. He is liable to the payee and to all subsequent parties
b. He is liable to all parties subsequent to the maker or drawer
c. He is liable to all parties subsequent to the payee
d. He is not liable to any party
2. If he signs for accommodation of the payee
a. He is liable to the payee and to all subsequent parties
b. He is liable to all parties subsequent to the maker or drawer
c. He is liable to all parties subsequent to the payee
d. He is not liable to any party
3. A makes a note payable to the order of B. B indorses it to C. X obtains possession of the note fraudulently and indorses it to D and D to E.
Which of the following is not correct?
a. C can recover from A and B because his rights against them were not affected by the forgery
b. E cannot enforce the note against C because Cs signature is wholly inoperative
c. E cannot enforce the note against A and B because Es rights against them are cut-off by the forged signature of C which is inoperative
d. E cannot enforce the note against D who derived his title through the forged signature of C which is wholly inoperative
4. An instrument payable to the order of A bears the following indorsement at the back thereof :
A, B, C and D. The present holder is E. Which is correct?
a. E may recover payment from A, B, C and D only in the order in which they indorse
b. If E sues B, b can allege that he and A have agreed that A should be liable first
c. If B is made to pay E, B can go against A, C and D
d. E may recover payment from any of said indorsers
5. A makes a note payable to the order of b. The note is indorsed successively by B to C, C to D, D to E, and E to F, the present holder. Suppose
the note is dishonored in the hands of F, which of the following is correct?
a. If F gives notice only to D, the notice operates also a notice to E, a party subsequent to D
b. If D after having been given notice by F, gives notice to E, the effect would lake E still liable to the instrument
c. If F gives notice to E, E may notify B, C and D
d. If F gives notice to D, the notice operates as a notice to B and C
6. A makes a note payable to B or order. The following are the indorsers of the note in the order of their indorsements: B-C-D-E-F- (holder) - G
(subsequent holder). The note is dishonored in the hands of F, who notifies B, C, D and e. Which is not correct?
a. The notice given by F to B, inures to the benefit of C, D, E and G
b. The notice to C inures to the benefit of D, E and G
c. The notice to D inures to the benefit of E and G
d. The notice to E inures to the benefit of B, C, D and G
7. A makes a note payable to bearer and delivers it to B. in turn, B negotiated it by mere delivery to C, who indorses it specially to D. D
negotiates it by special indorsement to E, who negotiates it to F by mere delivery. A did not pay. One is not correct?
a. F may go after E, his immediate transferor
b. F cannot hold D liable because F did not acquire title through the indorsement of D
c. D can hold C liable as C is not only his immediate transferor but he got his title through Cs special indorsement
d. F can hold B and C liable because they are parties prior to F
8. When a negotiable instrument which has been materially altered is in the hands of a holder in due course who is not a party to the
alteration
a. He may enforce payment thereof because material alteration is a personal defense
b. He cannot enforce payment thereof because material alteration is a personal defense
c. He may enforce payment thereof according to his original tenor
d. He cannot enforce payment because the instrument is void
9. A makes a promissory note, payable to B or bearer, A delivered the note to B. B indorsed the note to C. C placed the note in his wallet which
was stolen by X, who finding the note, indorsed it to D by forging Cs signature. D indorsed the note to E, who in turn delivered the note to
F, a holder in due course. Which is not correct?
a. A is liable to F, who is a holder in due course
b. A cannot raise the defense of forgery because his signature is genuine
c. F may go against either D or E because as against D, Ds signature is genuine and as against E, he is Fs immediate transferor
d. F cannot go against either B or C because as against B, F did not derived title through Bs indorsement and as against C, Cs signature is
forged and transfers no title
10. A issues a promissory note payable to the order of B. B indorsed it to C, then by C to D, by D to E, and by E to F. in the hands of F, the note
was dishonored by A. which is not correct?
a. F can give notice to B, C, D and E
b. If F notifies E, E may notify D, D may notify C, and C may notify B
c. Should F notify only D, the latter may notify B and C but not E
d. Should F notify only D, the latter may notify B, C or E
11. Using the preceding no. assume F gave notice of dishonor to E, D, C and B and then negotiated the note to G, one of the following is not
correct
a. The notice given to E, D, C and B will inure to the benefit of G
b. The notice by F to D inures to the benefit of E so that if E is held liable by G, E can go against D
c. The notice by F to C inures to the benefit of B, so that if B is held liable by G, B can go against C
d. G can hold any one among B, C, D and e liable
12. When a bill of exchange is payable on demand, presentment must be made
a. On the day it falls due c. within a reasonable time after its issue
b. Before the maturity date d. within a reasonable time after the last indorsement thereof
13. A issued a negotiable promissory note to B or order P 100, 000. B altered it to p 400, 000 and indorsed it to C. If C is a holder in due course,
he
a. Can collect P 400, 000 from A or P 400, 000 from B
b. Cannot collect from a but can collect p 400,000 from B
c. Can collect P 100,000 from A and P 300,000 from B
d. Can collect P 100,000 from A and P 400,000 from B
14. A issued a negotiable promissory note to B with the amount in blank, but with authority given to B to fill up the blank for P 100, 000. B filled
it up for P 400, 000 and negotiated it to C. If C is a holder in due course, he
a. Can collect P 100,000 from A and P 300,000 from B
b. Can collect P 200,000 from A and P 200,000 from B
c. Can collect P 400,000 from A or P 400,000 from B
d. Can collect P 100,000 from A or P 400,000 from B
15. When the instrument is not payable on demand, presentment must be made
a. On the day it falls due c. within a reasonable time after its issue
b. Before the maturity date d. within a reasonable time after the last indorsement thereof
16. Which of the following is not allowed
a. 2 payees as A and B c. 2 drawees as C and D
b. 2 payees as A or B d. 2 drawees as C or D
17. After presentment, the drawee should decide whether or not he will accept the bill within
a. 12 hours b. 24 hours c. 36 hours d. 48 hours
18. There is a need of presentment for acceptance, if the bill is
a. Payable on demand or sight
b. Payable at definite date
c. Payable in a number of days after a fixed event
d. Payable elsewhere than at the residence or place of business of the drawee
19. This is not allowed
a. Pay to the order of A and B P 10, 000 c. Pay to the order of A and B P 10, 000
To C and D Sgd. E To C or D Sgd. E
b. Pay to the order of A or B P 10, 000 d. Pay to the order of A or B P 10, 000
To C and D Sgd. E To C Sgd. E
20. A bill which is, or on its face purports to be both drawn and payable within the Philippines is a(an)
a. Foreign bill b. International bill c. Inland bill d. Universal bill
21. The party named by the drawer in his bill or by an indorser in his indorsement against whom the holder may collect in case the bill is
dishonored by non-acceptance or non-payment is
a. Accommodation party c. Surety
b. Guarantor d. Referee in case of need
22. Which of the following is not a characteristic of a bill of exchange?
a. Original parties are the drawer, drawee, payee and acceptor
b. Acceptance is generally required
c. Drawer is primarily liable
d. Contains an unconditional order
23. Maturity of an undated negotiable instrument issued payable 60 days after sight is computed from
a. Date of first indorsement c. Date of issue
b. Date of last indorsement d. Date of first presentment for acceptance
24. The holder of the bill presenting the same for acceptance may require that the acceptance be written on the bill and if such request is
refused may treat the bill as
a. Accepted b. Approved c. Snubbed the bill d. Accepted the bill
25. Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an acceptance for the honor of the
a. Maker b. Drawer c. Drawee d. Indorser
26. Where a bill payable after sight is accepted for honor, its maturity is calculated from the date of the
a. Presentation for acceptance c. Acceptance for honor
b. Presentment for acceptance d. Noting for non-acceptance
27. A draws a bill payable to B or order with C as the drawee and D, E, F and G as successive indorsers and H as holder. If C does not pay and H
has duly protested for non-payment and X offers to pay supra protest for the honor of F while Y for D, who shall be given preference
a. None, as H, the holder may choose c. Y as his payment will discharge most parties
b. X if he is the first to offer to pay d. Both, but it shall be pro-rata
28. Where in a bill the drawer and the drawee are the same person or where the drawee is a fictitious person, or a person not having capacity
to contract, the holder at his option may treat the instrument as
a. Dishonored c. Promissory note
b. Bill of exchange d. Either a bill of exchange or a Promissory note
29. --Instruments falling due or becoming payable on Saturday are to be presented for payment, at the option of the holder, on the next
succeeding business day or before 12: 00 noon on Saturday when the entire day is not a holiday
--A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument is deemed to be a waiver only of a
formal protest and not of presentment and notice of dishonor
a. True, True b. False, True c. True, False d. False, False
30. --Where the parties to be notified are partners, notice of dishonor to any party is notice to the firm provided there has been no dissolution
--Where notice of dishonor is given by or on behalf of a party entitled to give notice, it inures to the benefit of the holder and all parties
prior to the party to whom notice is given
a. True, True b. False, True c. True, False d. False, False
31. Upon request of A, B makes a note to accommodate A. Then A indorses the note to C, when C presented the note to B, the latter dishonor
it, which is correct?
a. Notice of dishonor should be given to A to make him liable as an indorser
b. As a party secondarily liable, without the notice of dishonor, A will be discharged
c. As an accommodated party, A will be liable even if notice of dishonor is not given to him
d. As an indorser, A will be liable provided notice of dishonor is given
32. --Except where the contrary appears, every indorsement is prima facie to have been made at the place where the instrument is issued
--When the instrument is materially altered, the holder who is not a party to the alteration may enforce it according to its original tenor
a. True, True b. False, True c. True, False d. False, False
33. A bill of landing is beyond the scope of the negotiable instruments law because
a. It is without an unconditional promise or order to pay a sum certain in money
b. It is in favor of a specified person and not to order
c. It is an order to pay out of a particular fund
d. It is not payable on demand, or at fixed or determinable future time
34. A letter of credit lacks of negotiability because
a. It is without an unconditional promise or order to pay a sum certain in money
b. It is in favor of a specified person and not to order
c. It is an order to pay out of a particular fund
d. It is not payable on demand, or at fixed or determinable future time
35. Payment for honor as distinguished from acceptance for honor
a. The protest is for dishonor by non-payment
b. Consent of the holder is required
c. The bill is not overdue
d. Must not be a party already liable on the bill
36. Which is not the effect of certification of a check?
a. It is equivalent to acceptance
b. It discharges person secondarily liable regardless of who procured the certification
c. It operates as an assignment of the funds of the drawer in the hands of the drawee bank
d. The holder can compel the drawee bank to encash it
37. Accepted, if Dave tops the CPA board examination is
a. Conditional indorsement
b. Facultative indorsement
c. Qualified indorsement
d. General indorsement
38. A negotiable promissory note is given by A to B; B indorsed it to C; C to D and D to E. E negotiated back the note to A. A re-negotiated the
note to F. As a result.
a. The re-negotiation is not allowed because of confusion or merger which extinguished the obligation
b. If A later on pays the instrument, he cannot go after B, D, C, E and F
c. If A later on pays the instrument, he cannot go after F, but he can go after B, C, D and E
d. If A later on pays the instrument, he can go after F, B, D, C and E
39. A bill reads:
Pay to the order of B P 200,000, 30 days after sight. To X Sgd. A
Subsequent indorsements: B to C; C to D; D to E and E to F then F made the first presentment for acceptance on February 28, 2011, X
refused to accept so that a notice of dishonor by non-acceptance to A, B, C, D and E were given. Before the maturity however, at the
request of the drawer, F made a second presentment for acceptance to X on March 5, 2011 and this time X accepted the bill. On maturity
date, the drawee acceptor refused to pay. Which is correct?
a. The notice of dishonor by non-acceptance is sufficient to hold A, B, C, D and E liable
b. The maturity date of the instrument is counted from March 5, 2011 when the instrument was accepted
c. F may immediately proceed against the parties secondarily liable
d. F must give a notice of dishonor by non-payment to all parties secondarily liable to make them liable
40. A made a promissory note payable to the order of B. Subsequent indorsements are as follows: B to C; C to D; D to E; and E to F, F decided to
strike out the indorsement of D and later negotiated the instrument to G, a holder in due course. Which is correct?
a. G can go after A, B and C but not D, E and F
b. D, E and f are discharged from their obligations to the instrument
c. G can go after A, b, C, D, E and F as it was F who struck-out the indorsement Of D
d. G can go after A, B, C and F




Prepared by:
MA. PAMELA C. CASTILLO,CPA

Noted:
DR. MARITES D. MANLONGAT
Dean-SEBA / VP- Academic Affairs