Negotiable Instruments Law MCQ

Negotiable Instruments Law MCQ
1. Negotiable Instruments are not legal tender except:
a. A check which has been cleared and credited to the creditor’s account shall be equivalent to
a delivery to the creditor of cash.
b. A consignation in court through a certified check.
c. A manager’s check.
d. A Treasury warrant issued in favor of a public officer.
2. An instrument is payable on demand except:
a. When expressed to be payable on demand or at sight or on presentation.

b. When no time for payment is expressed.
c. When an instrument is issued, accepted or endorsed when overdue, it is as regards the
person so issuing, accepting or endorsing, payable on demand.
d. When instrument is paid upon a contingency.
3. An instrument payable to order is negotiated by:
a. Delivery and payment

b. Endorsement and delivery
c. Presentment and payment
d. Delivery and assignment
4. The words are equivalent to “bearer” except for one.
a. Assignee or holder
b. Possessor or on return of the certificate properly endorsed
c. Order of the bearer
d. To X or his collector or to bearer B
5. Which of the following statements is true as to date?
a. An undated instrument is considered to be dated as of the time it was issued.

b. The instrument is not valid for the reason that it is ante-dated or post-dated, provided this is
not done for an illegal or fraudulent purpose.
c. The insertions of the wrong date avoid the instrument in the hands of the subsequent
holder in due course.
d. Where instrument or acceptance or endorsement thereon is dated, such is not deemed to
be prima facie to be the true date of the making, acceptance or endorsement.
6. As a rule, no person is liable on the instrument whose signature does not appear thereon, thus:
a. One is liable whose signature was forged but is precluded from setting up forgery as a
defense.
b. One is liable for accepting a bill of lading on a separate piece of paper.
c. One is liable for an unconditional promise in advance to accept a bill of exchange before it is
drawn.
d. One who signs using a trade name or assume name is liable as if he had signed in his own
name.
7. When a signature is forged or made without the authority of the person whose signature it
purports to be, it is wholly inoperative. Hence there is no right to:
a. Contract an endorsement
b. Retain the instrument
c. Effect delivery
d. Accept payment
8. The following constitutes material alterations except for one:
a. alteration of the date

b. alteration of the sum payable either principal or interest
c. alteration on the serial number of a check
d. alteration of the medium of currency in which payment is to be made
9. Every negotiable instrument is deemed prima facie to have been issued for a valuable
consideration and every person whose signature appears thereon to have become a party
thereto for value. Which statement is not true with respect to the presumption?
a. The presumption is rebuttable.

b. Any consideration sufficient to support a simple contract is “value”.
c. Absence of consideration does not include situations when the consideration given is
contrary to law, morals or public policy.
d. Such want of consideration is a defense against immediate parties but not against a holder
in due course.
10. A restrictive indorsement confers upon the indorsee the right:
a. To receive payment of the instrument

b. To transfer his rights as such endorsee even when the form of indorsement does not
authorize him to do so.
c. To acquire title in the case of the first indorsee
d. To constitute the endorser as agent of the endorsee
11. A qualified indorser has limited liability, i.e., he is liable if the instrument is dishonored by non-
acceptance or non-payment due to:
a. Good title on the part of the endorser

b. Capacity to endorse on the part of the prior parties
c. Forgery
d. Fact that at the time of the endorsement, the instrument was valid
12. An instrument which is negotiable in origin continues to be negotiable until it has been
a. Assign before maturity

b. Restrictively endorsed
c. Paid before maturity
d. Specially endorse
13. A check is described in the following terms except for one
a. It is always drawn on a bank.

b. It is always payable on demand.
c. It is not presented for acceptance although its certification is equivalent to acceptance.
d. It must be presented for acceptance in some cases.
14. A promissory note
a. Contains an order to pay

b. Contains at least three parties: the drawer, drawee and payee
c. If payable on demand must be presented for payment
d. Drawn to the drawer’s own order is already complete
15. The following are not true in case of the liability of a maker except for one
a. Maker is primarily and unconditionally liable on the note

b. Maker is secondarily liable on the bill
c. Maker may insert in the instrument a stipulation negativing or limiting his own liability to
the holder
d. Presentment for payment is necessary to hold the maker liable
16. Every person negotiating an instrument by delivery or by qualified indorsement warrants:
a. That all prior parties had no capacity to contract

b. That the instrument is genuine and in all respect what it purports to be
c. That he has knowledge of any fact which would impair the validity of the instrument
d. That the warranty extends in favor of a holder in case of negotiation by delivery
17. Presentment for payment to be sufficient must be made –
a. By the drawer or by some other person

b. To the person primarily liable on the instrument
c. At any place
d. On any day regardless of the time
18. An instrument is dishonored by non-payment when
a. It is duly presented for payment and payment is refused or cannot be obtained.

b. Presentment for payment has been waived by the party.
c. When the person to whom payment is made cannot be located.
d. Presentment for payment is dispensed with.
19. There is payment in due course when
a. Payment is made to the endorser of the instrument

b. Payment is made at or after maturity of the instrument
c. Payment is made prior to the maturity of the instrument
d. Payment is made despite notice that the title of the holder is defective.
20. A notice of dishonor is not required in the following cases except for one
a. Where the drawer and drawee are the same person.

b. When the drawee is a fictitious person or a person not having the capacity to contract.
c. When the drawer is the person to whom the instrument is presented for payment.
d. When the drawer has right to expect or require that the drawee or acceptor will honor the
instrument.
21. In order that renunciation of rights by the holder against the principal debtor will discharge the
instrument, said renunciation must be:
a. Absolute and unconditional

b. Made prior to maturity of the instrument
c. Done verbally
d. Made by altering the instrument
22. In the hands of a holder in due course, not a party to the alteration, the instrument may be
enforced according to its original tenor except as against the following who are liable on the
altered tenor of the instrument:
a. First indorser
b. Holder in due course
c. Subsequent indorsers
d. Holder for value
23. The statement “He took it in good faith and for value” entails that
a. Bad faith requires actual knowledge of the exact truth.

b. Purchase of the instrument at a discount does not prevent a holder from being a holder in
due course.
c. Good faith refers to the good faith of the seller of the instrument and not the endorsee or
transferee.
d. Good faith is knowledge of facts which tend to show that there was something wrong with
the transaction.
24. A holder in due course receives the instrument free from any defect which it may have had in
the past. Only real defenses may be set up against a holder in due course. One of these is:
a. Forgery
b. Duress
c. Alteration
d. Set Off
25. Personal defenses may not be set up against a holder in due course. Among these defenses are
the following except for one:
a. Fraud in inducement
b. Discharge before maturity
c. Fraud in pactum
d. Unintentional alteration
26. An acceptor is precluded from:
a. Setting up the defense that the drawer is non-existent or fictitious.

b. He cannot claim that the signature of the drawer is not a forgery.
c. He can escape liability by alleging want of consideration between him and the drawer.
d. Setting up the defense that the drawer has no authority to draw the instrument.
27. Where a person, not otherwise a party to an instrument, place thereon his signature in blank
before delivery, he is liable as indorser in accordance with the following rules except for one:
a. In an order instrument, he is liable to the payee and to all subsequent parties.

b. If bearer instrument, or payable to order of maker or drawer, he is liable to all parties
subsequent to the maker or drawer.
c. In bill of exchange, drawer may insert a stipulation limiting his liability in all cases.
d. If he signs for accommodation of the payee, he is liable to all parties subsequent to the
payee.
28. The following cases constitute sufficient presentment for payment except for one:
a. Presentment for payment of a promissory note by a bank having it for collection.

b. Presentment for payment to a clerk at the accounting room of the acceptor or promissor.
c. Presentment for payment at the store designated to a person connected therewith.
d. Presentment for payment made on a Sunday or holiday.
29. When a negotiable instrument is dishonored, notice of dishonor must be given to:
a. The drawer and to each endorser

b. The drawer and assignee
c. The drawer and co-maker
d. The drawer and to each indorsee
30. The following are bill of exchange except for one:
a. Bank notes
b. Cashier’s check
c. Treasury warrants
d. Certificate of deposit

Negotiable Instruments Law MCQ

Uploaded by

Copyright:

Available Formats

Negotiable Instruments Law MCQ

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Negotiable Instruments Law MCQ

Uploaded by

Copyright:

Available Formats

Negotiable Instruments Law MCQ

1. Negotiable Instruments are not legal tender except:

2. An instrument is payable on demand except:

a. When expressed to be payable on demand or at sight or on presentation.

3. An instrument payable to order is negotiated by:

a. Delivery and payment

4. The words are equivalent to “bearer” except for one.

5. Which of the following statements is true as to date?

a. An undated instrument is considered to be dated as of the time it was issued.

8. The following constitutes material alterations except for one:

a. alteration of the date

a. The presumption is rebuttable.

a. To receive payment of the instrument

a. Good title on the part of the endorser

a. Assign before maturity

13. A check is described in the following terms except for one

a. It is always drawn on a bank.

14. A promissory note

a. Contains an order to pay

a. Maker is primarily and unconditionally liable on the note

16. Every person negotiating an instrument by delivery or by qualified indorsement warrants:

a. That all prior parties had no capacity to contract

17. Presentment for payment to be sufficient must be made –

a. By the drawer or by some other person

18. An instrument is dishonored by non-payment when

a. It is duly presented for payment and payment is refused or cannot be obtained.

19. There is payment in due course when

a. Payment is made to the endorser of the instrument

a. Where the drawer and drawee are the same person.

a. Absolute and unconditional

a. Bad faith requires actual knowledge of the exact truth.

a. Setting up the defense that the drawer is non-existent or fictitious.

a. In an order instrument, he is liable to the payee and to all subsequent parties.

a. Presentment for payment of a promissory note by a bank having it for collection.

a. The drawer and to each endorser

30. The following are bill of exchange except for one:

You might also like