University of the Cordilleras

College of Accountancy
1st Term, AY 2018-2019

TEST QUESTIONS
FINALS EXAMINATION
ABL 4(Negotiable Instruments Law)
Professor: Atty. Mark A. Madalang Jr.

TRUE OR FALSE. Write TRUE if the statement is TRUE and write FALSE if the statement is
FALSE.(2% each- 20points)

1. Parties prior to the forged signature are cut-off from the parties after the forgery.
2. The cut-off rule in a sense states that prior parties will not be held liable and can raise
the defense of forgery.
3. The holder of a forged instrument can only enforce the instrument against parties
who became such after forgery.
4. Infants and corporations incur liability by their indorsement or assignment of an
instrument.
5. An incomplete but delivered instrument is a real defense.
6. Where an incomplete and undelivered instrument is in the hands of a holder in due
course, there is a prima facie presumption of delivery.
7. Delivery is essential to the validity of any negotiable instrument.
8. A person whose signature does not appear on the instrument is liable.
9. An agent is not liable on the instrument if he were duly authorized to sign for or on
behalf of a principal.
10. If an agent discloses his principal, the agent is personally liable on the instrument.

DEFINE. (4% each- 20 points)

1. Forgery
2. Material Alteration
3. Holder in Due Course
4. Accommodation Party
5. Negotiable Instrument

STATE the LIABILITY and EFFECTS of the LIABILITIES OF the FOLLOWING PARTIES: (5% each-
20 points)

1. The maker
2. The drawer
3. The acceptor
4. The indorser

ENUMERATION. (10%)

1. Effects of a forged signature (3%)

2. Requisites of an accommodation party (3%)
3. Exceptions of a Notice of Dishonor (4%)

ESSAY. (5% each- 30 points)

1. A bill of exchange has Raponsel for its drawee, Darrel as drawer, and Jutie as holder.
When Jutie went to Raponsel for presentment, Jutie learned that Raponsel is only 15
years old. Jutie wants to recover from Darrel but the latter insists that a notice of
dishonor must first be made, the instrument bing a bill of exchange. Is Darrel correct?
Explain.

2. How does the “SHELTER PRINCIPLE” embodied in the Negotiable Instruments Law
operate to give the rights of a holder in due course to a holder who does not have the
status of a holder in due course? Explain.

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3. The signature of X was forged as drawer of a check. The check was deposited in the
account of Y and when deposited was accepted by AAA Bank, the drawee bank.
Subsequently, AAA Bank found out that the signature of X was actually forged. Discuss
the liabilities of the parties.

4. A check for P50,000.00 was drawn against drawee bank and made payable to XYZ
Marketing or order. The check was deposited with the payee’s account at ABC Bank
which then sent the check for clearing to drawee bank. Drawee bank refused to honor
the check on the ground that the serial number thereof had been altered. XYZ
marketing sued the drawee bank. is it proper for the drawee bank to dishonor the
check for the reason that it had been altered? Explain.

5. Emerson asked financial support from his showbiz friend Carl. Jones who
accommodated him by issuing in his favor a postdated check in the sum of 90,000.00.
Both of them knew that the check would not be honoured because Car Jone’s
account had just been closed. The two then approached a businessman named
Miguel whom they asked to change the check with cash, even agreeing that the
exchange be discounted at 85,000.00 with the assurance that the check shall be
funded upon maturity. Upon Miguel’s presentment of the check for payment on due
date, it was dishonoured because the account had already been closed.

a. What are the elements of Bouncing Checks Law in order to constitute it as a

crime? (5%)

b. Can Miguel hold Emerson and Carl Jones liable for BP 22 for the loss of his
85,000.00? (5%)

Checked by: Noted by:

Vanessa M. Roberto Jasmin May P. Baniaga

COA Department Head COA Dean

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