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TRUE OR FALSE

1. An instrument originally payable to order maybe converted into a bearer instrument.


2. An instrument originally payable to bearer maybe converted into an order instrument
3. If an authorized agent signs for and on behalf of his principal, the latter will be liable, as a
rule.
4. A person who signs a trade or assumed name will be liable to the same extent as if he had
signed in his own name.
5. A person who signs a trade or assumed name will be liable to the same extent as if he had
signed in his own name.
6. If a bill of exchange is accepted at the instance of the holder, the drawers and indorsers are
discharged.
7. If a check is accepted at the instance of the holder, the drawers and indorsers are discharged.
8. Minority is a real defense available against a holder in due course.
9. Prior parties of a minor indorser can set-up minority as a defense against a holder in due
course.

1. Pay to the order of B, P25,000, at sight after the arrival and discharge of 10 boxes of sardines
from Vessel X at Pier 8, Manila.

To: PNB Sgd. A

Statement No. 1. The instrument is negotiable because it is payable on demand.


Statement No. 2. The instrument is not negotiable because the order is conditional.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false
2. I promise to pay to the order of B, P8,000 one year after date in 5 month’s installments of
P1,600 each, “with the privilege of discharging this note by payment of principal less a discount
of 5% within 30 days from the date thereof.”
Sgd. X

Statement 1. The note is negotiable because although it is not dated, one year from date
will be one year from issuance thereof.
Statement 2. The instrument is not negotiable because the sum is not certain.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

1. I promise to pay to the order of B, U.S.$1,000 in current money at Manila Philippines, on


December 10, 2009.

Statement 1. This note is negotiable because the sum is certain.


Statement 2. This note is not negotiable because it does not state a particular kind of
current money.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

4. I promise to pay to the order of B, P20,000 at such time as the promissor may
choose.
Sgd. X
Statement 1. The instrument is negotiable because it is payable on demand.
Statement 2. The instrument is payable on a determinate future time.
A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

5. I promise to pay to the order of B, P20,000 on _________.


Sgd. X

Statement 1. The instrument is incomplete, hence not negotiable.


Statement 2. The instrument is complete and considered payable on demand.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

6. Pay to the order of B, P20,000 on December 1, 2009.


Accepted:

Sgd. X Sgd. Y

Statement 1. The bill is negotiable but ambiguous.


Statement 2. The bill is not negotiable and at the same time ambiguous.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false
6. I promise to pay to bearer or order P20,000 on demand.
Sgd. A

Statement 1. This is payable to bearer.


Statement 2. This note is negotiable because although it is payable to order, the payee is not
specified with reasonable certainty.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

7. A negotiable note is signed in this manner:

Sgd. X, agent of Y

Statement 1. It is X who is liable because there was no disclosure of the principal.


Statement 2. It is Y who is liable because the words “agent of Y” is sufficient disclosure.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

8. I promise to pay Batman P20,000 on demand.


Sgd. A

Statement 1. This is negotiable provided A knows Batman is a non-existing person at the


time he made the note.
Statement 2. This is a negotiable note payable to bearer.
A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

9. Pay to the order of B, P20,000 on demand.


To: SantaClaus Sgd. A

Statement 1. The bill is not negotiable because the drawee is fictitious.


Statement 2. The bill is still negotiable and can be treated as a promissory note.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

10. I promise to pay to the order of B, P20,000 on December 1, 2009 with costs and attorney’s fees
incurred for the collection of the debt.
Sgd. A

Statement 1. The instrument is negotiable because the sum certain is ascertainable on the face of
the instrument.

Statement 2. The instrument is not negotiable because the sum is not certain.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

11. Due to Maria Santos P5,000 on December 1, 2009.


Sgd. A

Statement 1. This is a negotiable bill of exchange because it does not contain a promise to pay.

Statement 2. This is nevertheless a promissory note but it is not negotiable because it is


payable to order.

A. True; False
B. False; True
C. Both statements are true.
D. Both statements are false

CASE ANALYSIS
1. For the purpose of lending his name without receiving value therefor, Pedro makes a note
for P20,000.00 payable to the order of X who in turn negotiates it to Y, the latter knowing
that Pedro is not a party for value.
a. May Y recover from Pedro if the latter interposes absence of consideration?
b. Supposing under the same facts, Pedro pays the said P20, 000.00, may he recover
the same amount from X? Explain [1998 Bar Examination].

2. Nora applied for a loan of P100,000.00 with BUR Bank. By way of accommodation,
Nora’s sister, Vilma, executed a promissory note in favor of BUR Bank. When Nora
defaulted, BUR Bank sued Vilma, despite its knowledge that Vilma received no part of the
loan.
a. May Vilma be held liable? Explain [1996 Bar Examination].

3. Santos purchased Vera’s car for P50,000.00. Not having enough cash on hand, Santos
offered to pay in check. Vera refused to accept the check unless it is indorsed by Reyes,
their mutual friend. Reyes indorsed Santos’ check and Vera, knowing that Reyes had not
received any value for indorsing the check, accepted it. The next day, Vera presented the
check to the drawee bank for payment. Payment was refused for lack of funds. Vera gave
notice of dishonor to Reyes, but Reyes refused to pay, saying that he indorsed merely as a
friend.
a. Is Reyes liable to Vera? In the event Reyes voluntarily pays Vera, does Reyes have
the right to recover from Santos? Explain [1985 Bar Examination].