RFBT 3- LAW ON NEGOTIABLE INSTRUMENTS

Pre-test

Determine whether or not the following instruments are negotiable;

a- NEGOTIABLE c- CANNOT BE DETERMINED
b- NON-NEGOTIABLE d- INSUFFICIENT INFORMATION

1. I promise to pay B or bearer the sum of P10, 000 Sgd A

2. Mr. Y will oblige X by paying Z or order P1, 000 on his account. To X Sgd T
3. I agree to pay to the order of B P1, 000. Sgd A
4. Good to X or order P1, 000. Sgd A
5. Due X P1, 000. Sgd A
6. Due X or order on demand P1, 000. Sgd A
7. Pay to X or bearer P1, 000 if he marries Z. to Z Sgd A
8. I promise to pay to B or order P1, 000 ten days after death of X. sgd A
9. I promise to pay X or order P1, 000 (30) days from this date January 1,2001, at 5% interest p.a. Sgd A
10. I promise to pay to B or order P1, 000 together with all the sums that may be due to him on December 31,
1950 Sgd. A
11. I promise to pay to B or order P1, 000 in candies. Sgd A
12. I promise to pay to B or his order USA $1, 000 on December 31, 2050 exchange rate. Sgd A
13. I promise to pay X or order P1, 000 on or before December 2,. Sgd A
14. Pay to B or his assigns P1, 000 to X Sgd A
15. I promise to pay to the order of bearer P1, 000 Sgd A

Indicate what type of indorsement is made in the following examples.

a- BLANK c- BLANK
b- RESTRICTIVE d- CONDITIONAL
16. Pay to A. Sgd. B
17. Sgd. B
18. Pay to C only. Sgd. B or Pay to C and no other person. Sgd. B
19. Pay to C for collection. Sgd. B or Pay to C for deposit. Sgd. B
20. Pay to X in trust for C. Sgd. B

21. Which of the following instrument is not negotiable because the sum is not certain?
a. I promise to pay to B or order P1, 000 in installments
b. I promise to pay to B or bearer P1, 000 in four equal monthly installments beginning January 1, 1985
c. I promise to pay to the order of B the sum of P100 in two installments as follows: (1) P45 on Feb 1, 1985
and (2) P55 on June 1, 1985
d. Pay to B or order USA $1, 000 on the December 31, 2016 exchange rate
22. Which of the following instruments is non-negotiable because it is conditional order to pay?
a. Pay to B or order P1, 000 and reimburse yourself out of my money on your hands
b. Pay to B or bearer P1, 000 and debit the amount to my receivable
c. Pay to B or order P1, 000 on account of contract of sale between you and ABC Inc.
d. Pay to B or order p1, 000 out of my salary in the company
23. Which of the following instruments is non-negotiable because it is not payable in a determinable future
time?
a. 60 days after sight, pay to the order of J P1, 000
b. On or before December 31, 1985, I promise to pay X or order P1, 000
c. On the death of X, I promise to pay B or order P1, 000
d. 10 days before the death of A, I promise to pay B or bearer P1, 000
24. Which of the following instruments in non-negotiable?
a. I promise to pay to b or order P1, 000 on December 1, 1985, provided however, that if this note is not
paid at maturity date, the ring pledged may be sold at public auction
b. Six months after date, I promise to oay to B or order P1, 000 waiving the right to appeal and all of
valuation appraisement
c. I promise to pay B or order P1, 000 or 10 dogs at the option of holder
d. I promise to bearer P1, 000 and to deliver him two cars
25. the following instruments are payable to order, except
a. I promise to pay to the order of B P1, 000
b. Pay to the order of ourselves P100 to B
c. I promise to pay to the order of myself P1, 000
d. I promise to pay to the order of the bearer P1, 000

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26. The following instruments are payable to bearer, except
a. Pay to bearer P1, 000
b. Pay to B or bearer P1, 000
c. Pay to the order of Pacman P1, 000. (the issuer knew that the Pacman is a fictitious person)
d. Pay to bearer B P1, 000
27. Which of the following instruments is negotiable?
a. I promise to pay P or order P10, 000 on Christmas Day Sdg. M
b. I promise to pay P or order P10, 000 10 days before death of Mr. Jerry Tom Sdg. M
c. I promise to pay P or order P10, 000 when my means permit me to do so Sdg M
d. I promise to pay P or order P10, 000 on December 31, 2050 Sdg. M
28. Which of the following instruments is payable on a determinable future time?
a. I promise to pay P or order P10, 000 Sdg M
b. I promise to pay P or order P10, 000 on December 1, 1901. Sdg M
c. I promise to pay P or order P10, 000 on December 1, 2050 Sdg. M
d. I promise to pay P or order P10, 000 on the death of Mr. Noli Failon Sdg M
29. In which of the following negotiable instruments shall the agent be personally liable?
a. Pay to A or order P1, 000 Jose Cruz by Pedro Vega (sdg)
b. Pay to A or order P1, 000 (sdg) Pedro Vega for Jose Cruz
c. Pay to A or order P1, 000 (sdg) Pedro Vega as agent of Jose Cruz
d. Pay to A or order P1, 000 (sdg) Pedro Vega, agent
30. A, maker, issues a promissory note to B, who indorses it to C, C to D, D to E, now holder and last indorsee.
B gives to A no valuable consideration for the note. C is known to have given valuable consideration to
B for the indorsement of the note. Whether D and E gave valuable consideration is not known. Under the
law, as to whom shall E be considered a holder for value?
a. A, B, C, and D
b. A, B, and C
c. A and B
d. A only
31. When does an originally negotiable instrument stop to be negotiable?
a. When it is restrictively indorsed with words indicating “ payable to indorsee only” or “ payable
to no other person than indorsee”.
b. When it is discharged by payment in due course or other modes of discharging the negotiable
instrument.
c. Either A or B.
d. Neither A nor B.
32. Where an instrument is drawn or indorsed to a person as “cashier” or other fiscal officer of a bank or
corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer.
Who must negotiate the instrument for the negotiation to be valid under Act No. 2031?
a) It may be negotiated by the indorsement of the bank or corporation.
b) It may be negotiated by the indorsement of such officer of the bank or corporation.
c) Either A or B.
d) Neither A or B.
33. Which of the following indorsements is valid assuming the amount of the instrument is P1,000?
a.) Pay to X P400. Sgd Indorser
b.) Pay to C P600 and Pay to D P400. Sgd Indorser
c.) Pay to A or B P1000. Sgd Indorser
d.) Pay to A and B P1000. Sgd Indorser
e.) Assuming P400 has already been paid, Pay to A P600. Sgd Indorser
34. Which of the following indorsements is invalid assuming the amount of the instrument is P1000?
a.) Pay to A and B P1,000. Sgd Indorser
b.) Pay to A P1,000. Sgd Indorser.
c.) Pay to P1,000. Sgd. Indorser
d.) Sgd. Indorser
35. Which of the following definitions of the kinds of indorsement refers to facultative indorsement?
a.) It is an indorsement which specifies the person to whom, or to whose order, the instrument is to be
payable, and the indorsement of such indorsee is necessary to the further negotiation of the
instrument. If the instrument is originally an order instrument , it will revert an instrument converted to
bearer by blank indorsement to its original character of being order instrument.
b.) It is an indorsement which specifies no indorsee and an instrument so indorsed becomes bearer
instrument and may be negotiated by delivery.
c.) An indorsement which either prohibits the further negotiation of the instrument, or constitutes the
indorsee the agent of the indorser or vests the title in the indorsee in trust for or to the use of some

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 other person. But mere absence of words implying power to negotiate does not make an indorsement
this kind of indorsement.
d.) It is an indorsement which waives the benefit provided by law to the indorsers.
36. M, issued a PN payable to bearer to A. A negotiated it to B by delivery. B negotiated it to C by Special
Indorsement coupled with delivery. C negotiated it to D by Special Indorsement coupled with delivery. D
negotiated it to E by more delivery. To whom shall be liable?
a. C, D and E
b. C only
c. C and D only
d. C, D, and E only
37. M, issued a PN payable to bearer to A. A negotiated it to B by blank indorsement. B negotiated it to C
by more delivery. C negotiated it to D by Special Indorsement coupled with delivery. D negotiated it to E
by more delivery. Is the negotiation to E valid.
a. Yes because of blank indorsement.
b. No because the instrument is payable to order.
c. Yes because the instrument payable to bearer can be converted to order instrument.
d. No because order instrument is always order instrument.
38. M issues a PN to order to A. A specially indorsed it to B coupled with delivery. B specially indorsed it to C
coupled with delivery. C specially indorsed it to D coupled with delivery. Which indorsement can be
stricken or cancelled out by D.
a. A to B
b. B to C
c. C to D
d. None
39. M issues a PN to order to A. A specially indorsed it to B coupled with delivery. B specially indorsed it to C
coupled with delivery. C indorsed it in blank to D coupled with delivery. D specially indorsed it to E
coupled with delivery. E specially indorsed it to F with delivery. Which indorsement can be stricken or
cancelled out by F?
a. A to B
b. E to F
c. D to E
d. C to D
40. M issues a PN to order to A. A specially indorsed it to B coupled with delivery. B specially indorsed it to C
coupled with delivery. C indorsed it in blank to D coupled with delivery. D specially indorsed it to E
coupled with delivery. E specially indorsed it to F with delivery. Which indorsement can be stricken or
cancelled out by F?
a. A to B only
b. E to F only
c. D to E
d. Any indorsement
41. Which of the following defenses may be set up against any holder?
a. Absence of delivery of complete instrument
b. Filling of black or contrary to authority given
c. Illegality of consideration
d. Fraud in esse contractus
42. The following are the rights of a holder in due course, except
a. To sue on the instrument in his own name
b. To receive payment of the instrument, and if the payment is in due course, the instrument is
discharged.
c. To hold the instrument free from any defect of title of prior parties and free from defenses available
to the parties among themselves or free from personal defenses.
d. To hold the instrument free from real defenses.
43. May a holder not in due course enforce the instrument against a party prior to a holder in due course
even if there is personal defense present?
a. No in all instances.
b. Yes in all instances.
c. Yes if he derives his title through a holder in due course provided he is not a party to any fraud or
illegality affecting the instrument also known as shelter rule.
d. Yes if he derives his title through a holder in due course even if he is a party to any fraud of illegality
affecting the instrument.
44. The following are the rights of the holder not in due course, except
a. To sue the instrument in his own name.

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 b. To receive payment of the instrument, and if the payment is in due course, the instrument is
discharged.
c. To hold the instrument but is subject to the same defenses as if were non-negotiable meaning subject
to both real and personal defenses.
d. To hold the instrument free from personal defenses.
45. The following are the warranties of Acceptor by accepting the instrument, except
a. He admits the existence of the payee.
b. He admits the capacity of the payee to indorse.
c. He admits the genuineness of the drawer’s signature.
d. He guarantees the solvency of indorsers.
46. What is the liability of the Drawer by drawing the instrument?
a. He engages that he will pay it if the general indorser will not pay it.
b. He engages that he will pay it according to its tenor.
c. He engages that he will pay it according to the tenor of his acceptance.
d. He engages that on due presentment, the instrument will be accepted or paid or both, according
to its tenor, and that if it be dishonored and the proceedings of dishonor be duly taken, he will
pay the amount thereof to the holder or to any subsequent indorser who may be compelled to
pay it.
47. What are the warranties of Drawer by drawing the instruments?
a. He admits the existence of the payee.
b. He admits the capacity of the payee to indorse.
c. He admits the existence of the drawee.
d. All of the above.
48. What is the liability of the General Indorser by generally indorsing the instrument?
a. He engages that he will pay it even without notice of dishonor is given to him.
b. He engages that he will pay it according to its tenor.
c. He engages that he will pay it according to the tenor of his acceptance.
d. He engages that on due presentment, the instrument will be accepted or paid or both, according
to its tenor, and that if it be dishonored and the proceedings of dishonor be duly taken, he will
pay the amount thereof to the holder or to any subsequent indorser who may be compelled to
pay it.
49. The following are the warranties of a General Indorser by generally indorsing the instrument, except
a. That the instrument is genuine and in all respect what it purports to be.
b. That he has good title to it.
c. That all prior parties had capacity to contract.
d. That he has no knowledge of any fact which would impair the validity of the instrument or render
it valueless.
50. A qualified indorser is not secondarily liable to the instrument because he does not guarantee the
solvency of the person primarily liable. The following are the warranties of a Qualified Indorser by
qualifiedly indorsing the instrument although his warranties extend only to those parties who can trace
their title from such qualified indorsement, except
a. That the instrument is genuine and in all respect what it purports to be.
b. That he has good title to it.
c. That all prior parties had capacity to contract.
d. That the instrument, is at the time of his indorsement, is valid and subsisting.

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