COMM_Mercantile+Law (Answer Key)

NEGOTIABLE INSTRUMENTS LAW

(50 minutes; 93 questions)

1. One of these is a negotiable promise or order to pay:

a. A treasury warrant
b. A postal money order
c. A certificate of time deposit certifying that the bearer had deposited a
certain amount with the bank and repayable to the depositor.
d. An authorization to an addressee to pay.

2. One of these can be a negotiable promise or order to pay:

a. A promise to pay a specific person.

b. An acknowledgment of indebtedness.
c. An acknowledgment of indebtedness with a date for payment.
d. A request to an addressee to pay.

3. The sum payable is not certain in one of these cases:

a. It provides for payment of interest without specifying the rate.

b. It provides for payment of interest of 24 per cent a year.
c. It provides that the interest of 12 per cent a year will be raised to 18 per
cent in case of default.
d. It provides that the rate of the interest will be determined by the holder of
the instrument.

4. The sum payable is certain if:

a. It is payable in ten installments.

b. It is payable in ten monthly installments.
c. It is payable in ten monthly installments starting November 15, 2011 and
every fifteenth day of the month thereafter.
d. It is payable in ten equal monthly installments starting November 15,
2011 and every fifteenth day of the month thereafter.

5. The sum payable is not certain in one of these cases:

a. There is provision if an installment is not paid on time, the entire balance

will become due.
b. The sum payable is the equivalent of $1,000, United States currency, in
Philippine pesos according to the rate of exchange on the spot market on
the date of payment.
c. The sum payable is the equivalent of $1,000, United States currency, in
Philippine pesos according to the rate determined by the holder on the
date of payment.
d. It provides for payment of attorney’s fees in case the holder files a
collection case.

6. The obligation to pay is conditional in one of these cases:

a. It indicates the fund out of which reimbursement is to be made.

b. It indicates the account to be debited for the payment.
c. It mentioned the contract which gave rise to the issuance of the negotiable
instrument.
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d. It mentioned the contract which gave rise to the issuance of the negotiable
instrument and made the negotiable instrument subject to the terms and
conditions of the contract.

7. The obligation to pay is unconditional in one of these cases:

a. It makes the negotiable instrument subject to the terms and conditions of

the underlying contract but actually the terms and conditions did not
make the obligation to pay conditional.
b. It is payable out of a particular fund.
c. It is payable out of a particular fund but does not limit to that fund the
source of payment.
d. The payment is secured by a chattel mortgage, and it is provided that the
holder will look to the mortgage for payment.

8. An interest is not payable at a determinable future time in one of these cases:

a. It is payable on December 15.

b. It is payable 30 days from the date of issuance.
c. It is payable 30 days from the date of presentment for acceptance.
d. It is payable on or before November 15, 2011.

9. An instrument is payable at a determinable time in one of these cases:

a. It is payable 30 days before the death of John Smith.

b. It is payable 30 days after the death of John Smith.
c. It is payable upon completion of the construction of Golden Homes
Condominium.
d. It is payable upon passing of Juan Santos in the licensure examination for
medicine and Juan Santos passed on August 11, 2010.

10. A promissory note is not negotiable in one of these cases:

a. It provides that it is secured by a chattel mortgage on the car of the maker

and the maker undertakes to keep his car in good order and condition.
b. It provides that it is secured by a chattel mortgage and the holder could
foreclose the chattel mortgage in case of default.
c. It waives the exemption from execution in Section 13, Rule 39 of the Rules
of Court.
d. It requires the maker to pay P20,000 or to deliver ten sacks of rice at the
option of the holder.

11. One of these destroys the negotiability of an instrument:

a. It is not dated
b. It does not specify any consideration was given
c. It does not specify where it is payable
d. It is payable in the amount of 1,000 dollars without specifying the country
whose dollars are being referred to.

12. One of these statements is not correct:

a. A promissory note may be payable to the order of John Smith and Jane
Smith.
b. A promissory note may be payable to the order of John Smith and/or
Jane Smith.
c. A promissory note may be payable to the order of the widow of John
Smith
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d. A promissory note payable to the order of the City Treasurer of Manila is

not payable to the order of the acting Treasurer of the City of Manila.

13. An instrument is not payable to bearer if:

a. It is payable to the possessor.

b. It was made by the drawer payable to the order of a corporation, which
actually exists and of which he is an officer but he did not intend the
corporation to get the proceeds because he would get the proceeds for
himself.
c. Checks issued by a financier payable to the order of members of a savings
and loan association deposited instead by its officers in the account of the
savings and loan association are payable to bearer.
d. It is payable to the order of cash.

14. One of these statements is not correct:

a. If the sum payable expressed in words is P200 and the sum payable
expressed in figures is P2,000, the sum payable is P2,000.
b. If the instrument does not specify the date from which the stipulated
interest will run, it will run from the date of the instrument.
c. If the instrument does not specify the date from which the stipulated
interest will run and the instrument is undated, it will run from the date
of issuance of the instrument.
d. If the instrument is not dated, it will be dated as of the time it was issued.

15. One of these statements is not correct:

a. In case of conflict between the written and printed provisions the written
provisions prevail.
b. If there is an ambiguity as to whether the instrument is a bill or note, the
holder may treat it as either.
c. If a signature appears across the face of a promissory note, he will be
deemed an indorser.
d. If two persons signed a promissory note containing the words “I promise
to pay,” they are jointly liable.

16. One of these statements is not correct:

a. If an instrument payable at a fixed period after date is issued undated,

any holder may insert the true date of issue.
b. If the acceptance of an instrument payable at a fixed period after sight is
undated, any holder may insert the true date of presentation for
acceptance.
c. If a holder innocently inserted the wrong date of issuance of a promissory
note, it will be avoided as to him.
d. If the wrong date of issue was inserted in a promissory note, as to a
subsequent holder in due course, the date inserted will be regarded as the
true date.

17. One of these statements is not correct:

a. The holder of a check issued with the name of the payee in blank, may
negotiate it.
b. If a maker signed a promissory note in favor of bank and left the amount
blank, and the bank filled it up and sued him later for payment, he cannot
raise the defense that the promissory note is not valid.
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c. If the drawer of a check authorized the holder to fill it up for P50,000, and
he filled it up for P80,000, and the check was dishonored, he cannot hold
the drawer liable for any amount.
d. If the holder of a check was authorized by the drawer to fill up the check
for P50,000, he filled it up for P80,000, he indorsed it to a holder in due
course, and it was dishonored, the indorsee can hold the drawer liable up
to P50,000 only.

18. One of these statements is not correct:

a. A drawer who signed a check but left the name of the payee and the
amount payable blank and entrusted it to his employee, is not liable to
the holder if the check was stolen and dishonored for lack of funds upon
presentment for payment.
b. Since the officers of a corporation who signed blank checks to pay for
obligations of the corporation that might fall due during their trip abroad
were seriously negligent, if the check was stolen and encashed, the
corporation should bear 40 per cent of the loss.
c. If an incomplete and undelivered check was completed and negotiated
without authority to a holder in due course, and was dishonored, the
holder can hold the drawer liable.
d. In an incomplete and undelivered check was completed and negotiated
without authority to a holder, and was dishonored, the holder can hold
the person who negotiated the check to him liable.

19. One of these statements is not correct:

a. If a debtor issued a check to pay his creditor but a thief stole it in the
office of the debtor and indorsed it by forging the signature of the
creditor, to a third party who was able to encash it, the creditor can sue
the third party.
b. If the holder of a check payable to bearer delivered it to another for
safekeeping, he can ask for its return at any time.
c. If the holder of a check payable to bearer delivered it to somebody in
trust for him and the trustee tried to encash it but the check was
dishonored for lack of funds, the trustee cannot hold the drawer liable to
him.

d. If the holder of a check payable to bearer delivered it to somebody in

trust for him and the trustee delivered it to another, who is a holder in
due course, the holder can hold the drawer liable if the check was
dishonored.

20. One of these is not a requirement for an agent to avoid personal liability if he signs
a negotiable instrument:

a. He must be duly authorized.

b. His authority must appear in a public instrument.
c. He must indicate he is signing as an agent.
d. He must disclose his principal.

21. A person is not liable even if his own signature does not appear in a negotiable
instrument in one of these cases:

a. He signed in a trade or assumed name.

b. A duly authorized agent signed for him.
c. His signature was forged.
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d. He negotiated by delivering a negotiable instrument payable to

bearer.

22. The indorsement of one of these will not pass title to a negotiable instrument:

a. A minor.
b. A corporation acting ultra vires.
c. An insane person.
d. An enemy alien.

23. In one of these the signature is not forgery:

a. A man with failing eyesight was deceived into signing a promissory

note which was misrepresented to him as a power of attorney and
thus he had no intention to issue a promissory note.
b. Duress was exerted upon a man in the execution of a negotiable
instrument by grabbing his hand and forcing him to sign.
c. A drawer issued a check to the person before him whom he met for
the first time and who represented himself as a member of a
charitable organization. The endorsement of the payee would be a
forgery.
d. A drawer issued a check to the person before him who
misrepresented himself as somebody whom the drawer knew as the
head of a charitable organization. The indorsement by the impostor
would be a forgery.

24. One of these statements is not correct:

a. A drawee bank which paid a check in which the signature of the drawer
was a forgery must restore the amount it paid to the account of the drawer.
b. A drawee bank which paid a friend of the drawer who stole a check and
forged the signature of the drawer must restore the amount to the account
of the drawer. The drawer was not negligent.
c. A drawee bank must restore to the account of the drawer the amounts of
the checks it paid in which the external auditor of the drawer was able to
forge the signature of the drawer because he was asked to take charge of
reconciling the bank statements with the records of the drawer, since the
auditor was not an employee but an independent contractor.
d. A drawee bank must restore to the account of the drawer the amounts of
the checks it paid in which the signature of the drawer was forged, even if
the drawer did not examine the bank statements and did not discover the
forgeries promptly.

25. One of these statements is not correct:

a. The drawee bank must restore to the account of the drawer the amount of
the check payable to order which it paid although the indorsement was
forged.
b. A collecting bank must refund to the drawee bank the amount it paid for a
check presented by the collecting bank in which the indorsement of the
payee was forged.
c. The drawer is not entitled to the restoration to his account of the amount
the drawee bank paid to the holder of a check which is payable to bearer
and which has a forged indorsement.
d. The drawee bank must restore to the account of the drawer the amount of
the checks it paid with forged indorsements even if the drawer did not
inform it of the forgeries, because the drawer did not examine the bank
statements and the cancelled checks.
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26. One of these statements is not correct:

a. A drawer who allowed its retired cashier to continue picking up checks

it was issuing who then forged the indorsements of the payee, must
divide the loss with the drawee bank because of its negligence.
b. An acceptor who paid a bill of exchange with a forged signature of the
drawer cannot recover the payment from a holder in due course.
c. A drawee bank who paid a check with a forged signature of the drawer
cannot recover the payment from the collecting bank.
d. An acceptor who paid a bill of exchange payable to order with a forged
indorsement cannot recover the payment from the holder.

27. One of these statements is not correct:

a. A drawer of a check which was dishonored for lack of funds can be

convicted for violation of Batas Pambansa Blg. 22 even if no proof of
consideration was presented.
b. A travel agency was issued a check for the purchase of various plane
tickets by a customer which was dishonored for lack of funds. If it sued
on the basis of the amount of check and not the amount due for the
plane tickets, it need not prove the amount due for the plane tickets.
c. The pre-existing debt of a third person is sufficient consideration for the
issuance of a negotiable instrument
d. An extension of time to pay a debt is not a valid consideration for the
issuance of a negotiable instrument.

28. One of these statements is not correct:

a. For a person to be an accommodation party: (1) he must sign as maker,

drawer, acceptor, or indorser; (2) he must not receive value by virtue of
the instrument; and (3) he signed for the purpose of lending his name.
b. If a person was paid a fee for lending his name, he is not an
accommodation party.
c. To be able to hold an accommodation party liable, a holder must satisfy
the requirements to be a holder in due course, except for the fact that he
knew that the accommodation party did not receive any consideration.
d. If a president of a corporation issued a check as accommodation drawer
in behalf of the corporation to pay an obligation of his client, if the check
was dishonored, the president is the one who should be held liable. The
issuance of the check was ultra vires.

29. One of these statements is not correct:

a. An assignee is merely placed in the position of the assignor and takes the
instrument subject to all defenses available to the maker or drawer of the
instrument. In negotiation the holder takes the instrument free from
personal defenses available to prior parties.
b. If an instrument is payable to bearer, it may be negotiated by delivery. If
it is payable to order, it may be negotiated by indorsement of the holder
completed with delivery.
c. An indorsement must be an indorsement of the entire instrument, except
if it is payable in installments and had been paid in part.
d. A partial indorsement operates as a negotiation to the extent of the part
indorsed and as an assignment to the extent of the part which was not
indorsed.

30. One of these statements is not correct:

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a. A special indorsement specifies the person to whom or to whose order

the instrument is payable, and his indorsement is necessary for further
negotiation.
b. A blank indorsement specifies no indorsee and makes the instrument
payable to bearer.
c. The holder cannot convert a blank indorsement to a special indorsement.
d. A restrictive indorsement prohibits further negotiation, constitutes the
indorsee as agent of the indorser, or vests title in the indorsee as trustee.

31. One of these statements is not correct:

a. All the forms of restrictive indorsements prohibit further negotiation.

b. All subsequent indorsees acquire only the title of the restrictive indorser.
c. A qualified indorsement constitutes the indorser a mere assignor of the
title to the instrument.
d. Qualified indorsement does not impair the negotiability of the instrument

32. One of these statements is not correct:

a. If the indorsement is conditional, the maker or acceptor may disregard

the condition and pay or wait until the condition has been fulfilled.
b. A person to whom a conditional indorsement was made, will hold the
instrument and its proceeds subject to the rights of the indorser.
c. If there are two or more of parties and they are not partners, all must
indorse to negotiate the instrument.
d. If there are two or more payees or indorsees who are not partners and
only one of them indorsed the instrument, the indorsement will be valid
up to the extent of his share.

33. One of these statements is not correct:

a. Irregular indorsement exists when a person, not otherwise a party to an

instrument, signs it in blank before delivery.
b. If the instrument is payable to a third person, the irregular indorser is
liable to the payee and all subsequent parties.
c. If the instrument is payable to the order of the maker or drawer, or to
bearer, the irregular indorser is liable to all parties subsequent to the
maker or drawer.
d. If the irregular indorser signs for the accommodation of the payee, he is
liable to the payee and all subsequent parties.

34. One of these is not a requirement to be a holder in due course:

a. It is regular upon its face and contains a blank.

b. He became the holder of it before it was overdue, and without notice
that it had been previously dishonored if such was the fact.
c. He took it in good faith and for value.
d. 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.

35. One of these statements is not correct:

a. The title of a person negotiating an instrument is defective when he

obtained the instrument or any signature to it by fraud, duress, or force
and fear, or other unlawful means, or for an illegal consideration, or
when he negotiates it in breach of faith, or under such circumstances as
amount to fraud.
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b. The person to whom the instrument is negotiated has notice of an

infirmity in the instrument or defect in the title of the person
negotiating it, if he had actual knowledge of the infirmity or defect, or
knowledge of such facts that his action in taking the instrument
amounted to bad faith.
c. For the holder to be in bad faith, the holder must know what is wrong
with the instrument or that something is wrong with it but he does not
know what is exactly wrong.
d. A holder who has basis for suspicion but did not make a reasonable
investigation is not in bad faith.

36. One these statements is not correct:

a. A payee cannot be a holder in due course.

b. A collecting bank who complied with the request of the payee who
deposited a check with it not to present the check for payment
although it is already due, is not a holder in due course.
c. A holder is not a holder in due course if the check indorsed to it bore
a notice that it had been previously dishonored for lack of funds.
d. Gross negligence in taking a negotiable instrument does not constitute
the holder someone who is not a holder in due course.

37. One of these statements is not correct:

a. 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.
b. A holder who is not a holder in due course holds a negotiable
instrument subject to the same defenses as if it were not negotiable.
c. A holder who is not a holder in due course but derived his title from a
holder in due course and is not a party to any fraud or illegality
affecting the instrument, enjoys the same exemption from defenses as
a holder in due course.
d. A holder who is not a holder in due course need not prove that the
previous holder who indorsed the instrument to him is a holder in
due course, because this is presumed.

38. One of these statements is not correct:

a. The defenses from which a holder in due course is exempt are

personal defenses.
b. A holder in due course takes the negotiable instrument subject to real
defenses.
c. Personal defenses can be invoked only against the proper parties.
d. Real defenses are available against all parties.

39. One of these is not a personal defense:

a. Absence or failure of consideration.

b. Want of delivery of an incomplete instrument.
c. Insertion of wrong date.
d. Filling up of a blank contrary to authority given or not within a
reasonable time.

40. One of these is not a personal defense:

a. Fraud in the inducement.

b. Acquisition by force, duress, or fear.
c. Acquisition by unlawful means.
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d. Material alteration.

41. One of these is not a personal defense:

a. Acquisition for an illegal consideration.

b. Negotiation under circumstances that amount to fraud.
c. Negotiation in breach of faith.
d. Forgery

42. One of these statements is not correct:

a. Forgery committed before an indorser negotiated the instrument to

the holder is not available as a defense to the indorser.
b. Want of consideration between the drawer and the acceptor of a bill
of exchange is available as a defense against the holder.
c. A discrepancy between the engine number and the chassis number in
the sales invoice of a car bought from a dealer and the actual engine
number and chassis number is not available as a defense against the
financing company to whom the promissory note the owner signed
was indorsed, if it is a holder in due course.
d. A maker of a negotiable promissory note issued in favor of a car
dealer and indorsed to a financing company who granted a loan to
the maker is liable to pay the financing company even if the car was
not delivered, since it is a holder in due course.

43. One of these statements is not correct:

a. The maker of a negotiable promissory note warrants the existence of

the payee and his capacity to indorse.
b. The maker of a negotiable instrument undertakes to pay it according
to its tenor.
c. The maker who promised to pay unconditionally the amount payable
in the promissory note can raise the defense that the proceeds of the
loan were used to pay medical expenses of his daughter which should
have been paid by the creditor, who was trustee of certain properties
in favor of the daughter.
d. A buyer of a car from a dealer who executed a negotiable promissory
note which the dealer negotiated to a financing company must pay
the financing company if the dealer did not deliver the car, because
the financing company is a holder in due course.

44. One of these statements is not correct:

a. A drawer admits the existence of the payee and his capacity to

indorse.
b. The drawer engages that on due presentment the bill of exchange will
be accepted and paid and that if it is dishonored and the necessary
proceedings on dishonor are taken, he will pay the holder or any
subsequent indorsee who may be compelled to pay it.
c. The drawer may negative his liability by stipulating that there is no
recourse to him.
d. If a drawee bank debited the account of the drawer of check but
withheld the delivery of the money to the holder because of an
investigation, the holder cannot hold the drawer liable.

45. One of these statements is not correct:

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a. An acceptor cannot refuse to pay the holder of a bill of exchange on

the ground that the signature of the drawer is a forgery.
b. An acceptor cannot refuse to pay the holder of a bill of exchange on
the ground that the drawer has no sufficient funds with him.
c. If the amount payable in a bill of exchange was altered by increasing
it before the acceptor accepted, he is liable for the increased amount.
d. If the acceptor paid the holder of a bill of exchange but it turned out
that the indorsement in favor of the holder was a forgery, the acceptor
cannot recover the payment.

46. One of these statement is not correct:

a. Both a qualified indorser and general indorser warrant that: (1) the
instrument is genuine and in all respects what it purports to be; (2)
they have a good title to it; and (3) all prior parties had capacity to
contract.
b. A qualified indorser warrants that he has no knowledge of any fact
that will impair the validity of the instrument, while a general
indorser warrants that the instrument is at the time of his
indorsement valid and subsisting.
c. A general indorser undertakes that on due presentment the bill of
exchange will be accepted and paid and that if it be dishonored and
the necessary proceedings on dishonor are duly taken, he will be
liable to the holder or any subsequent holder who may be compelled
to pay it.
d. If the drawee dishonored a bill of exchange on the ground that the
signature of the drawer is forgery, to be able to hold a qualified or
general indorser liable, the holder must prove the forgery.

47. One of these statements is not correct:

a. A depositor who maintains a foreign currency deposit accommodated

a friend by allowing him to deposit in his account a foreign manager’s
check payable to bearer, so that it could be presented to the bank
which issued it. The bank allowed his friend to withdraw the money
before the check had been cleared and without presentation of the
passbook. When the foreign bank dishonored the check for being
spurious, the collecting bank cannot hold its customer liable to make
good the loss.
b. A bank in which a foreign check was deposited but added below the
indorsement of the depositor the phrase “up to P17,500 only”, which
resulted in the dishonor of the check because of the partial
indorsement, canot hold the depositor liable on the basis of his
undertaking as indorser.
c. The warranties of a person negotiating by delivery extends to the
immediate transferee only.
d. The warranties of a qualified indorser extend to any person to whom
the instrument was negotiated, while the warranties of a general
indorser extends to holders in due course only.

48. One of these statements is not correct:

a. Presentment for payment is not needed to charge the maker or acceptor.

b. Presentment for payment is needed to charge the maker or the acceptor if
the instrument is payable on demand.
c. If the instrument is payable at a special place, the ability and willingness of
the maker or the acceptor to pay the instrument there at maturity is
equivalent to tender of payment.
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d. Presentment for payment is necessary to charge the drawer and the

indorsers.

49. One of these statements is not correct:

a. Presentment must be made to the maker or the acceptor, or if he is

absent or inaccessible, to any person found at the place of
presentment.
b. If the maker or acceptor is dead and no place of payment is specified,
presentment must be made to his personal representative.
c. If the makers or the acceptors are partners and no place of payment is
specified, presentment may be made to anyone of them.
d. If there are several makers or acceptors, they are not partners, and no
place of payment is specified, presentment may be made to anyone of
them.

50. One of these statements is not correct:

a. Presentment is not required to charge a drawer if he stopped the

payment of the bill of exchange.
b. Presentment is not required to charge a drawer if he has no
sufficient funds with the drawee and there is no arrangement for
the drawee to advance the funds.
c. Presentment is not required to charge an indorser if the
instrument was made or accepted for his accommodation and he
has no reason to expect it will be paid if presented.
d. Presentment for payment is required even if the bill of exchange
was dishonored by non-acceptance.

51. Presentment is not excused in one of these:

a. After the exercise of reasonable diligence, presentment cannot be

made.
b. The drawee is a fictitious person.
c. Presentment was waived expressly or impliedly.
d. Notice of dishonor was waived.

52. An instrument is not dishonored by non-payment in one of these:

a. It was duly presented for payment and payment was refused or

could not be obtained.
b. The maker issued a check to pay the holder.
c. Presentment is excused and the instrument is overdue and
unpaid.
d. The bank against which the drawer issued a check was closed.

53. One of these statements is not correct:

a. Notice of dishonor must be given to the drawer and each indorser.

b. If notice is given to an agent of the party to be notified, he must be
authorized to receive it.
c. If the person to be notified is dead, the only way by which notice
may be given is by giving it to his personal representative.
d. If the parties to be notified are partners, notice may be given to
any of them.

54. One of these statements is not correct:

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a. If the parties to be notified are joint persons who are not partners,
notice must be given to each of them unless one is authorized to
receive the notice for the others.
b. If the party to be notified has been adjudged insolvent, notice may
be given to him or to the assignee appointed by the insolvency
court.
c. Notice of dishonor may be given by or on behalf of the holder or
by or on behalf of any party to the instrument who may be
compelled to pay the holder and would have a right of
reimbursement from the party notified.
d. If the notice will be given by an agent, he must be authorized by
the principal.

55. One of these statements is not correct:

a. The notice may be in writing or oral.

b. A written notice must be signed.
c. The notice must identify the instrument and indicate its dishonor
by non-acceptance or non-payment
d. A misdescription of the instrument will not vitiate the notice if the
party notified was not misled.

56. One of these statements is not correct:

a. Notice may be waived before the time for giving it or after the
failure to give due notice.
b. Waiver may be expressed or implied
c. If the waiver was embodied in the instrument upon its issuance, it
is binding upon all parties.
d. If the waiver was written after the issuance of the instrument, and
was written above the signature of an indorser, it will bind him
and all subsequent parties.

57. One of these statements is not correct:

a. Waiver of protest includes waiver of notice of dishonor.

b. An indorser who paid the holder partially, waived the lack of
notice of dishonor.
c. A drawer who asked for the renewal of the bill of exchange
waived the lack of notice of dishonor.
d. An indorser who told the holder that he would see what he could
do, waived the lack of notice of dishonor.

58. The drawer must be given notice of dishonor in one of these:

a. The drawer and drawee are the same person.

b. The drawee is a fictitious person.
c. The drawee had no capacity to contract.
d. The drawee was absent when the instrument was presented for
payment.

59. The drawer need not be given notice of dishonor if:

a. He was the person to whom the instrument was presented for

payment.
b. The drawer of check did not deposit funds to pay for the check he
issued.
c. The drawer stopped the payment of the bill of exchange.
d. The drawer was abroad.
 13

60. An indorser must be given notice of dishonor if:

a. The drawee is a fictitious person, and the indorser was aware of it

when he indorsed the instrument.
b. The drawee had no capacity to contract, but the indorser was not
aware of it.
c. The indorser was the person to whom the instrument was
presented for payment.
d. The instrument was made or accepted for his accommodation.

61. One of these statements is not correct:

a. Any drawer or indorser who was not given notice of dishonor will
be discharged.
b. The failure to give notice of dishonor will not bind a holder in due
course subsequent to the failure.
c. If the instrument is payable in installments and there is no
acceleration clause, failure to give notice of dishonor for non-
payment of an installment will not discharge the drawer and the
indorsers as to the subsequent installments.
d. If the instrument is payable in installments and has an
acceleration clause, failure to give notice of dishonor for non-
payment of an installment will discharge the drawer and the
indorser as to the subsequent installments, even if the acceleration
is not automatic.

62. One of these statements is not correct:

a. Notice of dishonor to the drawer and to the indorsers will make

them primarily liable.
b. Notice of dishonor given by the holder benefits all subsequent
holders and all prior parties who have a right of recourse against
the party notified.
c. Notice of dishonor given by a party entitled to give the notice will
benefit all parties subsequent to the party notified but not the
holder.
d. A holder can sue the parties to whom he gave notice of dishonor
without need of proceeding first against the maker or the
acceptor.

63. One of these is not a means for discharging a negotiable instrument:

a. Payment in due course by the principal debtor.

b. Payment in due course by the party accommodated if the instrument was
made or accepted for his accommodation.
c. Payment by a third person.
d. Intentional cancellation by the holder.

64. One of these is a means for discharging a negotiable instrument:

a. Payment by an accommodation maker.

b. Cancellation without intention, by mistake, or without authority
of the holder.
c. The principal debtor becomes holder of the instrument at or after
maturity in his own right.
 14

d. The principal debtor becomes holder of the instrument at or after

maturity as administrator of an estate.

65. One of these is a means for the discharge of negotiable instrument:

a. The instrument was negotiated to the holder before maturity in

his own right and he retained possession of it at maturity.
b. Loss of the thing due.
c. Fulfillment of a resolutory condition.
d. Fortuitous event.

66. One of these will not discharge a party secondarily liable

a. Any act which will discharge the instrument.

b. Intentional cancellation of his signature by the holder.
c. Discharge of a prior party.
d. Discharge of a prior party due to insolvency.

67. One of these will not discharge a party secondarily liable:

a. Valid tender of payment by a prior party.

b. Release of the principal debtor.
c. Release of the principal debtor with the assent of the party
secondarily liable.
d. Release of the principal debtor with express reservation of the
right of recourse against the party secondarily liable.

68. One of these statements is not correct:

a. An agreement binding upon the holder to extend the time of

payment will discharge parties secondarily liable.
b. An agreement binding upon the holder to extend the time of
payment will not discharge parties secondarily liable if the right of
recourse against them was reserved.
c. An agreement binding upon the holder to extend the time of
payment will not discharge parties secondarily liable if they
assented to it.
d. Payment by a party secondarily liable will discharge the
instrument.

69. One of these statements is not correct:

a. Payment by a party secondarily liable who was a holder in due

course when he took a promissory note will restore him to that
position even if at the time of payment he was aware that there
was failure of consideration between the maker and the payee.
b. Payment by a party secondarily liable who was not a holder in
due course when he took a promissory note will restore him to
that position even if the party he paid was a holder in due course.
c. The party secondarily liable who paid the instrument can strike
out his indorsement and all subsequent indorsements.
d. The party secondarily liable who paid the instrument can
negotiate the instrument again absolutely.

70. One of these statements is not correct:

 15

a. A holder may renounce all his rights against any party to the instrument
before, at, or after its maturity.
b. An absolute and unconditional renunciation by a holder of his rights
against the principal at or after maturity discharges the instrument.
c. Renunciation does not affect the rights of a holder in due course without
notice of it.
d. An oral renunciation is always invalid.

71. One of these alterations is not material:

a. Changing the effect of the instrument.

b. Changing the date.
c. Changing the sum payable, either for principal or interest.
d. Writing that the interest will be 12 per cent of a year where no rate was
mentioned in the instrument.

72. One of these alterations is not material:

a. Changing the time or place of payment.

b. Changing the number or relations of the parties.
c. Adding a co-maker to a promissory note.
d. Changing the serial number of a check.

73. One of these alterations is not material:

a. Changing the currency in which payment will be made.

b. Making the instrument payable to order instead of bearer.
c. Adding a place for payment where none is specified.
d. Changing the date of indorsement of a promissory note payable
on October 29, 2011 from October 6, 2011 to October 5, 2011.

74. One of these statements is not correct if the amount payable in a promissory note
was changed from P10,000 to P40,000:

a. If the holder is a holder in due course, he can enforce payment

from the maker and indorsers before the alteration for P10,000.
b. If a holder is a holder in due course, he can enforce payment from
the party who made the alteration and subsequent indorsers for
P40,000.
c. If the holder is not a holder in due course, he cannot enforce
payment from the maker and subsequent indorsers before the
alteration.
d. If the holder is not a holder in due course, he cannot enforce
payment from the party who made the alteration and subsequent
indorsers.

75. One of these statements is not correct:

a. Acceptance of a bill is the signification by the drawee of his assent to the

order of the drawer.
b. The acceptance must be in writing and need not be signed.
c. The acceptance must not express that the drawee will perform his promise
by any other means than the payment of money.
d. The acceptance may express that the drawee will perform his promise by a
means other than the payment of money if the bill of exchange gave the
holder the option to require something other than the payment of money
and he exercised it.
 16

76. One of these statements is not correct:

a. The holder may require that the acceptance be written on the bill
of exchange.
b. If the request is refused, the holder should treat the bill as
dishonored.
c. An acceptance of any bill of exchange on a separate instrument
does not bind the acceptor except in favor of a person to whom it
was shown and who received the bill for value on the faith of it.
d. An unconditional promise in writing to accept a bill before it is
drawn will not bind the acceptor except in favor of a person to
whom it was shown and who received the bill for value on the
faith of it.

77. One of these statements is not correct:

a. The drawee is allowed 24 hours to decide whether or not he will accept the
bill.
b. If the drawee does not return the bill accepted or unaccepted within 24
hours, he will be deemed to have accepted it.
c. If the drawee requires the return of the bill before the expiration of 24
hours, he must decide before its expiration whether or not he will accept
the bill.
d. If the drawee destroys the bill, he will be deemed to have accepted it.

78. One of these statements is not correct:

a. A general acceptance assents without qualification to the order of

the drawer.
b. A qualified acceptance varies expressly the effect of the bill as
drawn.
c. An acceptance to pay at a particular place is qualified.
d. An acceptance which makes payment dependent on the
fulfillment of a condition is qualified.

79. One of these statements is not correct:

a. An acceptance to pay a part only of the amount for which the bill
was drawn is qualified.
b. An acceptance to pay on a date different from the date of maturity
in the bill is qualified.
c. If there are several drawees and not all of them accepted, the
acceptance is qualified.
d. An acceptance which stated that it was being made pursuant to a
deed of sale selling a parcel of land is qualified.

80. One of these statements is not correct:

a. The holder may refuse to take a qualified acceptance.

b. If the holder does not obtain an unqualified acceptance, he should
treat the bill as dishonored by non-acceptance.
c. Where a qualified acceptance is taken, the drawer and the
indorsers are discharged from liability on the bill.
d. The drawer and the indorsers are not discharged from liability
only if they expressly assented to the qualified acceptance.

81. Presentment for acceptance is not required in one of these:

 17

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 stipulated for it.
c. Where the bill is payable elsewhere than at the residence or place of
business of the drawee.
d. Where the bill is payable on demand.

82. One of these statements is not correct:

a. A bill required to be presented for acceptance must be presented

for acceptance or negotiated within a reasonable time.
b. A bill must be presented for acceptance on a business day and
before it is overdue.
c. If the drawee is dead, presentment for acceptance cannot be made
to the administrator of his estate.
d. If the drawee has been adjudged insolvent, presentment for
acceptance may be made to him or to the assignee appointed by
the insolvency court.

83. One of these statements is not correct:

a. If there are two or more drawees, presentment for acceptance

must be made to all of them.
b. If the drawees are partners, presentment for acceptance may be
made to one of them.
c. If one of the drawers is authorized to accept or refuse acceptance,
presentment for acceptance may be made to him only.
d. If a partnership is undergoing dissolution, presentment can be
made only to the partner who is in charge of the dissolution.

84. One of these statements is not correct

a. Presentment for acceptance may be made on any day on which a

negotiable instrument may be presented for payment.
b. Presentment for acceptance cannot be made on a Saturday.
c. Delay in presenting for acceptance a bill payable elsewhere than at
the place of business or residence of the drawee because of
insufficiency of time despite exercise of reasonable diligence is
excused.
d. Delay due to a fortuitous event is excusable.

85. Presentment for acceptance is not excused in one of these:

a. The drawee is dead, has absconded, is a fictitious person, or does

not have the capacity to contract.
b. After the exercise of reasonable diligence, presentment cannot be
made.
c. Although presentment was irregular, acceptance was refused on
some other grounds.
d. The drawee requested the holder to delay the presentment.

86. One of these statements is not correct:

a. If a bill required to be presented for acceptance, was not presented

for acceptance or negotiated within a reasonable time, the drawer
and all indorsers are discharged.
b. A bill is deemed dishonored by non-acceptance when: (1) it is
duly presented and acceptance as prescribed was refused or
 18

cannot be obtained; or (2) presentment of acceptance is excused,

and the bill is not accepted.
c. If a bill is deemed dishonored, the holder must give the drawer
and the indorsers notice of dishonor or he loses his right of
recourse against them.
d. If a bill was dishonored by non-acceptance before its date of
maturity, the holder must wait until such date before having
recourse against the drawer and the indorsers.

87. One of these statements is not correct:

a. A check is a bill of exchange drawn on a bank and payable on demand.

b. The provisions of the Negotiable Instruments Law which are applicable to
bills of exchange payable on demand do not apply to checks.
c. Special types of checks include: (1) cashier’s checks; (2) manager’s checks;
(3) memorandum checks; (4) traveler’s checks; and (5) crossed checks.
d. Checks need not be presented for acceptance.

88. One of these statements is not correct:

a. A cashier’s check and a manager’s check are checks drawn by

officers of a bank upon the bank of which they are officers.
b. A cashier’s check and a manager’s check are primary obligations
of the bank which issued them and constitute a written
undertaking to pay them upon demand.
c. A bank which sold a manager’s check because of its mistaken
belief that the bank account of the buyer with it was still open
cannot refuse to pay the payee to whom the check was delivered.
d. A bank which issued a manager’s check payable to the order of
cash can refuse to pay it because the buyer issued an order to stop
its payment on the ground that he delivered it to the wrong party.

89. One of these statements is not correct:

a. A memorandum check is a check given by the drawer to the payee

in the nature of a memorandum of indebtedness rather than as
payment.
b. The drawer of a memorandum check who secretly took it from the
payee is liable for theft.
c. A traveler’s check is a check with the name of the payee left blank
which is sold by a bank in various denominations to those who
will travel, which must be signed by the buyer at the time of
purchase, and which must be countersigned when it is delivered
to a person whose name will be indicated as the payee. The bank
will replace a traveler’s check if it is lost or stolen.
d. Philippine banks do not certify checks anymore.

90. One of these statements regarding a crossed check is not correct:

a. It may not be encashed but must be deposited in a bank.

b. It may be negotiated only once and to someone who has a bank
account.
c. It serves as a warning that it was issued for a definite purpose and
to be a holder in due course the indorsee must inquire if he is
receiving it pursuant to that purpose.
d. It is not negotiable.

91. One of these statements is not correct:

 19

a. A crossed check is a check with two parallel lines drawn

transversally on the upper left hand side on the face of the check.
b. If the name of a particular bank is written between the two
parallel lines on the crossed check, it must be deposited in that
bank and not in any other bank
c. If a crossed check was presented for payment and was
dishonored, the holder can hold the drawer liable.
d. The practice of banks is that they will honor a check only for a
period of six months from the date of its issuance.

92. One of these statements is not correct:

a. If a check was not presented on time after its issuance, the drawer
will be discharged from liability to the extent of the loss caused by
the delay.
b. If a check was not presented on time and became stale, the drawer
will be discharged from his liability under the contract which was
the basis for the issuance of the check.
c. If a check was not presented on time and became stale, the drawer
remains liable under the contract which was the basis for the
issuance of the check and will be discharged to the extent he was
prejudiced if the bank became insolvent.
d. An indorser is discharged if a check was not presented on time
and became stale, because it is conclusively presumed he was
prejudiced by the delay.

93. One of these statements is not correct:

a. A check does not operate as an assignment of funds in the deposit

of the drawer with the bank.
b. The drawer of a check can stop its payment of a check which has
not yet been honored by the drawee bank.
c. The payee of a check can sue the drawee bank if it erroneously
dishonored the check for insufficiency of funds.
d. If a drawee bank erroneously honored a check despite the
insufficiency of funds in the account of the drawer, it cannot
recover the payment from the payee.