Law 3 – Negotiable Instruments 5.

Which of the following instruments is not

negotiable for the reason that the instrument is not
PRELIMS 2009-2010 payable at a determinable future time.

1.Give the instrument listed herein which is not A .“On the death of X, I promise to pay to the
negotiable as it is beyond the scope of the order of B P1,000.00. Sgd.”A”
Negotiable Instruments Law:
B. “On or before October 30, 2009, I promise
A. Certificate of Deposit to pay B or his order P1,000.00. Sgd.”A”
B. Due Bill
C. Post-Office Money Order C. “Sixty days after sight, I promise to pay to
D. Trade Acceptance the order of B P1,000.00. Sgd.”A”

2.Under the Negotiable Instruments Law, a D. “Ten days before the death of X, I
certificate of stock is not negotiable instrument promise to pay B or his order P1,000.00.
because it lacks the requisites of: Sgd.”A”

A. The instrument must be in writing and 6. An instrument is considered payable on

signed by the maker or drawer. demand:
B. It must contain an unconditional promise
or order to pay a sum certain in money. A. When no time of payment is expressed.
C. It must be payable on demand, or at a fixed B. When payable to order.
or determinable future time. C. When the last endorsement is in blank.
D. It must be payable to order or bearer. D. When the last endorsement is restricted.

3. This negotiable instrument is always drawn 7. This negotiable instrument is always drawn
against a bank. against a bank:

A. Bill of Exchange A. Bill of exchange

B. Check B. Check
C. Due Bill C. Due bill
D. Promissory Note D. Promissory note

4. Which of the following instruments is not 8. This instrument is negotiable:

payable to bearer?
A. “I promise to pay P20,000.00” (Signed: Jose
A. “Pay to the order of bearer P1,000.00. Santos).
To:X Sgd.A” B. “Pay Pedro Torres or order P20,000.00 if he
marries Maria Perez”.(Sgd: Santos)
B. “Pay to the bearer the sum of P1,000.00. C. “Good to Mario Cruz or order
To:X Sgd.”A” P20,000.00”. (Sgd: Jose Santos).
D. “I promise to pay Oscar Perez or order 20
C. “Pay to B or bearer the sum of P1,000.00. cavans of IR Rice in January, 2010”
To:X Sgd.”A” (Sgd:Jose Santos)

D. “Pay to Cash the sum of P1,000.00. 9. When there are three (3) parties, the drawer, the
To:X Sgd.”A” payee and the drawee, the instrument is a:

A. Promissory note
B. Certificate of indebtedness
C. Bank Check
D. Bill of exchange
 D. It must be payable only to a specific
10. A bill of exchange may be treated and person.
considered a promissory note:
15. An instrument is payable on demand:
A. When the drawer and the drawee are the
same person. A. When no time of payment is fixed.
B. When the drawee is fictitious. B. When last endorsement is in blank.
C. When the instrument is ambiguous. C. When the payee is blank.
D. All of the above. D. When payable to order.

11. Which of the following instruments is not 16. The following is not negotiable:
negotiable?
A. “Pay to C or order, P20,000.00 with
A. “I agree to pay to the order of A, exchange at 2.5%.
P30,000.00.” (Sgd. X) To: Z
B. “Good to A or order, P30,000.00.” (Sgd. Sgd:”M”
X)
C. “I promise to pay A or order P30,000.00 B. “Pay to order of C within 6 months from
on June 30.” (Sgd.X) date, the sum of P20,000.00 with interest at
D. “I promise to pay to A or order P5,000.00.” 12% per annum.
(Sgd.X) To:Z
Sgd:”M”
12. The promise or order is conditional, hence
non-negotiable. C. “Pay to C or bearer P20,000.00 6 months
after date. If not paid on due date, I agree to
A. “I promise to pay to B or order P20,000.00.” pay collection and Attorney’s fees.
(Sgd.Y) To:Z
B. “Pay to B or order P20,000.00.” (Addressed Sgd:”M”
to Z, signed by Y)
C. “Pay to B or order P20,000.00 and D. “Pay to C or order P20,000 in installment.
reimburse yourself out of my money in your To:Z
possession.” (Addressed to Z signed, by Y) Sgd:”M”
D. “Pay to B or order P20,000.00 out of my
money in your possession .” 17. This party is with primary liability:
(Addressed to Z, signed by Y)
A. Maker
13. An instrument is payable on demand: B. Drawer
C. Indorser
A. When payable to order. D. None of the three.
B. When the last endorsement is in blank.
C. When no time of payment is expressed. 18. If an instrument conforms to the following:
D. When payable within a period of time.
1. It must be in writing and signed by the
14. Which of the following is not necessary in maker or drawer.
order to make an instrument negotiable? 2. It must contain an unconditional promise or
order to pay a sum certain in money.
A. It must be in writing and signed by the 3. It must be payable on demand or at a fixed
maker. or determinable future time, and
B. It must contain an unconditional promise or 4. It must be payable to order or to bearer, the
order to pay a sum certain in money. instrument is a
C. It must be payable on demand or at a fixed
future time. A. Check
B. Promissory note
C. Bill of exchange 23. Which one of the following instruments is non-
D. Draft negotiable?

19. Which of the following instruments is A. “Pay to C or order P20,000.00 out of my

negotiable? money in your possession.” (Addressed to
A, signed by D)
A. “Good to Jose Paz or order, P20,000.00.” B. “Pay to C or order P20,000.00 and
(Sgd: Pedro Go) reimburse yourself out of my money in your
B. “I hereby authorize you to pay Jose Paz or possession.” (Addressed to A, signed by D)
order, P20,000.00 worth in sugar.” C. “I promise to pay C or order
Sgd: Pedro Go) P20,000.00.”(Sgd.D)
C. “I promise to pay Jose Paz or order P20,000 D. “Pay to C or order P20,000.00.” (Addressed
worth in sugar.” (Sgd: Pedro Go) to A, signed D)
D. “I promise to pay Jose Paz or order P20,000
on May 25.” (Sgd: Pedro Go) 24. An instrument is rendered non-negotiable if:

20. Which of the following is necessary A. There is an indication of a particular fund

requirement in order to make an instrument out of which reimbursement is to be made.
negotiable? B. There is an indication of a particular account
to be debited with the amount.
A. It must be in writing and signed by the C. The instrument is payable out of a
maker. particular fund.
B. It must be payable on demand or at a fixed D. Answer not given.
future time.
C. It must contain an unconditional promise to 25. This is a promissory note: “We promise to pay
pay a sum certain in money. Dada, Tina and Kate the sum of P18,000.00.”
D. All of the three(3) above. (Signed) Jing, Baby and Gail.

21. A promissory note as distinguished from a bill A. Gail is obliged to pay Kate P6,000.00.
of exchange. B. Gail is obliged to pay Kate P2,000.00.
C. Gail is obliged to pay Kate P12,000.00.
A. It contains an unconditional order. D. Gail is obliged to pay Dada, Tina and Kate
B. The one who issues it is primarily liable. P18,000.00.
C. The one who issues it is secondarily liable.
D. There are three (3) parties, the drawer, the 26. “I promise to pay the bearer, Juan dela Cruz
payee and the drawee. the sum of P20,000.00.”(Signed)Joe Perez. The
promissory note is:

22. Which one of the following instruments is A. Negotiable promissory note payable on
negotiable? demand.
B. Negotiable promissory note payable to
A. “I promise to pay C or order P20,000.00 if order.
he will pass the CPA examination in C. Negotiable promissory note payable to
October, 2010.” (Sgd.D) bearer.
B. “I promise to pay C or order P20,000.00 in D. Non negotiable.
four (4) installment.” (Sgd:D)
C. “I promise to pay C or order P20,000.00
60 days after the death of his father.”
(Sgd.D)
D. “I promise to pay C P20,000.00.”
(Sgd:D)
27. Which of the following is non-negotiable? D. Either Bill of exchange or a Promissory
note
A. I bind myself to pay B or bearer P10,000.
(Sgd.) A. 31. The instrument is payable to order when
B. I acknowledged being indebted to B in the
amount of P10,000.00. (Sgd.)A. A. The name of the payee does not purport to
C. I promise to pay to the order B P10,000. be the name of any person.
(Sgd)A. B. The only or last indorsement is an
D. I agree to pay to B or order P10,000 on indorsement in blank.
demand. (Sgd)A. C. Drawn payable to the order of a specified
person or to him or his order.
28. Manila D. Payable to the order of fictitious or non-
P20,000.00 June 1, 2010 existing person, and such fact was known
to the person making it so payable.
For value received, We promise to pay to the
order of Sanrio Lumber Co. at Manila, 32. An instrument is payable at a determinable
P20,000.00. future time, which is expressed to be payable,
except
Sanrio Furniture Mfg. Corp.
A. At a fixed period after date or sight.
Sgd. Pedro Sanrio B. On or before a fixed or determinable future
time specified therein.
Sgd. Helen Sanrio C. On or at a fixed period after the occurrence
of a specified event, which is certain
Statement 1. Pedro and Helen are not liable to happen, though the time of happening be
personally because they have disclosed their uncertain.
principal. D. Upon a contingency and the contingency
Statement 2. Pedro and Helen are not liable actually happens.
personally because by using the word “WE”
on the body of the instrument, they 33. One is not negotiable.
have indicated that they are signing for
and on behalf of Sanrio Mfg. Corp. A. A promise to pay to the order of B P10,000
with 12% interest thereon where the period
A. True; False from which interest is to be counted is not
B. False; True specified.
C. Both statements are true. B. A promises to pay to the order of B
D. Both statements are false P10,000 in four monthly installments
beginning June 12, 2009 with a provision
29. A bill of exchange drawn on a bank and that if A defaults in the payment of any
payable on demand. installment, the entire balance including
the unpaid installment shall become due
A. Bond C. Check and demandable.
B. Due bill D. Certificate of deposit C. A promise to pay to the order of B the sum
of US$1,000 payable in pesos at the rate of
30. Where in a bill the drawer and the drawee are exchange prevailing on January 1, 2010.
the same person or where the drawee is a fictitious D. A promises to pay to the order of B P10,000
person, or a person not having capacity to contract, with an agreement to pay attorney’s fees and
the holder at his option may treat the instrument as costs of collection.

A. Dishonored
B. Bill of exchange
C. Promissory note
34. The promise is conditional rendering the (Midterm )
instrument non-negotiable. 1.An instrument is considered payable on demand:

A. An indication of a particular fund out of A. When no time of payment is expressed

which reimbursement is to be made.
B. An indication of a particular account to be B. When payable to order
debited with the amount. C. When the last endorsement is in blank
C. A statement of the transaction which gives D. When the last endorsement is restricted
rise to the instrument.
D. An order or promise to pay out of a 2. This negotiable instrument is always drawn
particular fund against a bank:

A. Bill of exchange
35. Which is not negotiable?
B. Check
A. Pay to B or order P10,000 thirty days after C. Due bill
sight. Sgd. A to C D. Promissory note
B. I promise to pay B or order P10,000 on or
before March 1, 2010. Sgd. A 3.When there are three (3) parties, the drawer, the
C. I promise topay B or order P10,000 within payee & the drawee, the instrument is a:
20 days after the death of C. Sgd. A
D. Pay to B or order P10,000 within 10 days
A. Promissory note
if he marries D on June 12, 2010. Sgd. A
to C B. Certificate of indebtedness
C. Bank check
36. Where the instrument is addressed to a D, Bill of exchange
drawee, he must be named or otherwise indicated
therein with reasonable certainty. This requirement 4. A bill exchange may be treated and considered a
is applicable to promissory note:

A. Promissory notes, if negotiable

A. When the drawer and the drawee are the same
B. Promissory notes, if not negotiable
person
C. Bills of exchange and promissory notes
D. Bills of exchange and but not promissory B. When the drawee is fictitious
notes C. When the instrument is ambiguous
D. All of the above
37. Which of the following is not a feature of a
negotiable instrument? 5.An instrument is payable on demand:

A. As substitute for money.

A. when payable to order
B. Accumulation of secondary contracts.
C. It increases credit accumulation. B. when the last endorsement is in blank
D. Represents title of goods. C. when no time of payment is expressed
D. when within a period of time
6.Which of the following is not necessary in order 11. M makes a promissory note for P2, 000.00
to make an instrument negotiable? payable to the order of P.P negotiates the note to A
who with the consent of P raises the amount to P20,
A. It must be writing and signed by the maker 000.00 and thereafter indorses it to B. B to C and C
to D who is not a holder in due courses. In this case:
B. It must be contain an unconditional promise or
order to pay a sum certain in money
C. It must be payable on demand or at a fixed A. B can recover P2, 000.00 as against M.
future time B. P and A are liable to D for P20, 000.00
D. It must be payable only to a specific person C. B and C are not liable to D
D. Answer not given
7. This party is with primary liability:
12. The following are instances when a bank may
A. Maker refuse to pay checks drawn against it, except one:
B. Drawer
C. Indorser A. If there is a “stop payment” issued by the drawer
D. None of the three B. When the bank receives notice of the drawer’s
death
C. If the drawer’s deposit is insufficient
8. An indorser of a note or a bill is
D. If the drawer is insolvent
A. Secondary liable
13. The following are functions of a negotiable
B. Tertiary liable
instrument. Choose the exception.
C. Primary liable
D. Not liable
A. It increase purchasing power in circulation
B. As legal tender
9. An endorsement where the indorser adds the
C. As substitute for money
phrase “without recourse” is called:
D. It increases credit circulation
A. Blank indorsement
14. X obtains the signature of Y for autograph
B. Restrictive indorsement
purpose. X write a negotiable promissory note
C. Qualified indorsement above Y’s signature. The note was validly
D. Conditional indorsement negotiated to Z who is a holder in due course. What
kind of defense can Y avail against Z?
10. An instrument is rendered non-negotiable if:
A. Personal defense
A. There is an indication of a particular fund out of B. Real defense
which reimbursement is to be made C. Equitable defense
B. There is an indication of a particular account to D. Qualified defense
be debited with the amount
C. The instrument is payable out of a particular 15. Which of the following is not a personal
fund defense?
D. Answer not given
A. Absence of consideration.
B. Forgery of a signature.
C. Nondelivery of a complete instrument.
D. Failure of consideration.
16. A issued a promissory note to the order of B for 19. A separate paper where indorsements may be
P10,000.00 payable on September 30, 2010 in made
payment of a TV set sold by B to him. B failed to
deliver the TV set to A and instead transferred the A. Sponge
note to C for value but without endorsement. Which B. Ilonge
of the effects of the transactions listed below is C. Lounge
valid? D. Allonge

A. C is deemed a holder for value when B 20.One who has signed the instrument as maker,
transferred the note to him. drawer, acceptor, or indorser without receiving
B. C becomes a holder in due course when B value thereof, and for the purpose of lending his
endorsed the note to C on October 4, 2010. name to some person is a (an)
C. C has no right to compel B to make the proper
endorsement to him. A. Creditor
D. C cannot collect from A because of A’s B. Accommodation party
defense of lack of consideration. C. Guarantor
D. Debtor
17. A issues a bill payable to the order of B. Later
B, without indorsing the bill transfers for a 21.The indorsement “Pay to C” Sgd. B is a
consideration said bill to C. As a result, one of the
following is not correct. A. Blank indorsement
B. Special indorsement
A. The bill is merely assigned and not negotiated C. Restrictive indorsement
B. The transferee acquired such title as the D. Qualified indorsement
transferor had therein
C. Transferee acquired the right to have the 22.An indorsement payable to the order of A is
indorsement of the transferor indorsed by A by merely affixing his signature
D. C is an assignee with the rights of a holder in without specifying the indorsee is a
due course.
A. Qualified indorsement
B. Restrictive indorsement
18. I promise to pay to the order of B, P10,000 from C. Blank indorsement
________ after date. Sgd. X D. Special indorsement

First statement. The note is negotiable because 23. An indorsement “Pay to A only” Sgd. B is a
after date refers to the date of issuance and date
of issuance can be inserted A. Restrictive indorsement
therein by the holder. B. Facultative indorsement
C. Special indorsement
Second statement. The note is negotiable because D. Qualified indorsement
this can be considered payable on demand.
24. An indorsement “Pay to A at his own risk”. Sgd.
A. First statement is true, second statement is false. B is a
B. First statement is false, second statement is true.
C. Both statements are true. A. Special indorsement
D. Both statements are false. B. Facultative indorsement
C. Qualified indorsement
D. Restrictive indorsement
25. An indorsement “Pay to A, notice of dishonor 31. A promissory note is indorsed to C who has
waived”. Sgd. B is a knowledge of the illegal consideration
between A, maker and B, payee. Later C
A. Conditional indorsement negotiates the note to D under circumstances
B. Restrictive indorsement which would make D a holder in due course. D
C. Qualified indorsement in turn indorses it to E and E back to C.
D. Facultative indorsement Which is correct?

26. A personal defense may be used against A. C can be considered a holder in due course
because he derived his title from E.
A. Holder in due course B. C cannot be considered a holder in due
B. Holder for value course.
C. Both A and B C. D, E and C are holders in due course.
D. Neither A nor B D. C can collect either from A or B but not from D
and E.
27. A real defense may be used against
32. One of the following indorsements is a valid
A. Holder in due course negotiation
B. Holder for value
C. Both A and B A. Pay to A P6,000 (amount of the instrument is
D. Neither A nor B P10,000)
B. Pay to A P7,000 and to B, the balance (amount
28. Three of the following are warranties of a of the note is P10,000)
qualified indorser, which is not? C. Pay to A P8,000 out of the amount of P10,000
of this note.
A. Capacity of prior parties D. Pay to A and B P10,000.
B. Instrument is valid and subsisting
C. He has good title 33. The following rules of construction apply where
D. Instrument is genuine and in all respect that it the language of the instrument is
purports to be ambiguous or there are omissions therein,
except:
29. An instrument which is originally negotiable
ceases to be negotiable when A. Where the instrument is not dated, it will be
considered to be dated as of the time it
A. Restrictively indorsed was issued.
B. Qualified indorsement B. Where there is a conflict between the written
C. The last indorsement is in blank and printed provisions of the instrument, the
D. The only indorsement is in blank written provisions prevail.
C. Where the instrument provides for the payment
30. One is not a condition to be a holder in due of interest without specifying the date from
course. which interest is to run, the interest runs from
the date of the instrument, and if the
A. That it is complete and regular upon its ace. instrument is undated, from the issue thereof.
B. That he became the holder of it before it was D. Where the sum payable is expressed in
overdue and without notice that it had been words and also in figures and there is
previously dishonored if such was the fact. discrepancy between the two, the sum denoted
C. That at the time it was negotiated to him it by the figures is the sum payable; but if the
has no infirmity or defect in the title of the figures are ambiguous or uncertain, reference
person may be had to the words to fix the amount.
negotiating it.
D. That he took it in good faith and for value.
34. The following instruments were presented to
you for evaluation:
I. “Pay to the order of A, P20,000”.
II. “Pay to the order of A, P20,000 or deliver to
him a piano of the same value, at his option.”
III. “Pay to the order of A, P20,000 or deliver to
him a TV of the same value”.
IV. “Pay to the order of A a piano worth
P20,000”.
Assuming all the other requisites of negotiability
are present, which of the foregoing instruments are
not negotiable?
A. Instruments I and II C. Instruments II and III
B. Instruments I and III D. Instruments III and IV
35. Consider these two statements:
I. An instrument originally payable to order
maybe converted into a bearer instrument.
II. An instrument originally payable to bearer
maybe converted into an order instrument.
A. Both statements are true C. Only
statement I is true
B. Both statements are false D. Only
statement II is true
36. Which of the following does not apply to a non-
negotiable instrument?
A. The instrument can be assigned
B. The transfer of the instrument does not give the
transferee the right to collect.
C. The transferee becomes a holder.
D. The transferee becomes an assignee.
37. The following are negotiable instruments,
except
A. Pay to the order of A P10,000 on or before June
2, 2010 and reimburse yourself out of my
deposit with you. To B Sgd. C
B. Pay to the order of A P10,000 on or before June
12, 2010 and charge the same to my
account. To B Sgd. C
C. Pay to the order of A P10,000 on or before June
12, 2010 in payment of the purchase price
of one cavan of rice I bought from him. To
B Sgd. C
D. Pay to the order of A P10,000 subject to the
terms and conditions of the sales contract
between him and the undersigned. To B
Sgd. C
38. The negotiable character of an instrument
otherwise negotiable is affected by this provision
which
A. Authorizes the sale of collateral securities in
case the instrument be not paid at maturity.
B. Authorizes a confession of judgment if the
instrument be not paid at maturity.
C. Gives the maker an election to require
something to be done in lieu of payment of
money.
D. Waives the benefit of any intended for the
advantage or protection of the obligor.
39. The following instruments are negotiable,
except
A. Pay to A or order P10,000 on or before
Christmas. To B Sgd. C
B. Pay to A or order P10,000 or deliver a cow at
the option of the holder. To B Sgd. C
C. Pay to A or order P10,000 on or before June 12,
2010. To B Sgd. C
D. Pay to A or order P10,000, 30 days after death
of E. To B Sgd. C
40. A forged signature may transfer title if
A. Procured by force or duress
B. A mere simulation or counterfeit
C. Unnecessary to one’s title as when a bearer
instrument contains a forged indorsement
D. Obtained by fraudulent use of carbon paper, or
was given for other purpose but was used in
converting the paper into a negotiable
instrument.
41. An indorsement “Pay to A for collection only”.
Sgd. B is a
A. Qualified indorsement
B. Restricitve indorsement
C. Special indorsement
D. Facultative indorsement
42. An indorsement “Pat to A in trust for B”. ---------------------------------------------------------------
Sgd. B is a ---------------------------------------------

A. Conditional indorsement For Semi- final

B. Restrictive indorsement
C. Qualified indorsement By Diaz
D. Facultative indorsement
1. Pay to the order of B, P25,000, at sight after the
43. An indorsement “Pay to A if he tops the CPA arrival and discharge of 10 boxes of sardines from
board exams. Sgd. B is a Vessel X at Pier 8, Manila.

A. Conditional indorsement To: PNB

B. Restrictive indorsement Sgd. A
C. Qualified indorsement
D. Facultative indorsement Statement No. 1. The instrument is negotiable
because it is payable on demand.
44. – If an authorized agent signs for and on behalf Statement No. 2. The instrument is not negotiable
of his principal, the latter will be liable, as a because the order is conditional.
rule.
A. True; False
- A person who signs a trade or assumed name B. False; True
will be liable to the same extent as if he had C. Both statements are true.
signed in his own name. D. Both statements are false

A. True; True C. True; False 2. I promise to pay to the order of B, P8,000 one
B. False; True D. False; False year after date in 5 month’s installments of P1,600
each, “with the privilege of discharging this note by
45. Which one of the following instruments is payment of principal less a discount of 5% within
negotiable? 30 days from the date thereof.”

Sgd. X
A. “I promise to pay B or order P20,000 if he will
pass the CPA board exam on May 2010. Statement 1. The note is negotiable because
(Sgd. A) although it is not dated, one year from date
B. “ I promise to pay B or order P20,000 in four will be one year from issuance thereof.
(4) installments”. (Sgd. A) Statement 2. The instrument is not negotiable
C. “I promise to pay B or order P20,000, 30 because the sum is not certain.
days after death of his father”. (Sgd. A)
D. “I promise to pay B P20,000”. (Sgd. A) 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.
 6. I promise to pay to bearer or order P20,000 on
A. True; False demand.
B. False; True Sgd. A
C. Both statements are true.
D. Both statements are false Statement 1. This is payable to bearer.
Statement 2. This note is negotiable because
4. I promise to pay to the order of B, P20,000 at although it is payable to order, the payee is not
such time as the promissor may specified with reasonable certainty.
choose.
Sgd. X A. True; False
Statement 1. The instrument is negotiable because B. False; True
it is payable on demand. C. Both statements are true.
Statement 2. The instrument is payable on a D. Both statements are false
determinate future time.
7. A negotiable note is signed in this manner:
A. True; False
B. False; True Sgd. X, agent of Y
C. Both statements are true.
D. Both statements are false Statement 1. It is X who is liable because there was
no disclosure of the principal.
5. I promise to pay to the order of B, P20,000 on Statement 2. It is Y who is liable because the words
_________. Sgd. X “agent of Y” is sufficient disclosure.

Statement 1. The instrument is incomplete, hence A. True; False

not negotiable. B. False; True
Statement 2. The instrument is complete and C. Both statements are true.
considered payable on demand. D. Both statements are false

A. True; False 8. I promise to pay Batman P20,000 on demand.

B. False; True Sgd. A
C. Both statements are true.
D. Both statements are false Statement 1. This is negotiable provided A knows
Batman is a non-existing person at the
time he made the note.
6. Pay to the order of B, P20,000 on December 1, Statement 2. This is a negotiable note payable to
2009. bearer.
Accepted:
A. True; False
Sgd. X Sgd. Y B. False; True
C. Both statements are true.
Statement 1. The bill is negotiable but ambiguous. D. Both statements are false
Statement 2. The bill is not negotiable and at the
same time ambiguous. 9. Pay to the order of B, P20,000 on demand.
To: SantaClaus Sgd. A
A. True; False
B. False; True Statement 1. The bill is not negotiable because the
C. Both statements are true. drawee is fictitious.
D. Both statements are false 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. 2.The following exceptions are the rights of a
D. Both statements are false holder in due course. Which is the exception?

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.
A. He may enforce payment of the instrument
for the full amount thereof against all parties
liable thereon.
B. He ma receive payment and if payment is in
due course, the instrument is discharged.
C. He holds the instrument subject to the
same defense as if it were non-negotiable.
D. He may sue on the instrument in his own
name.

Statement 2. The instrument is not negotiable 3.An indorser of a note or a bill is:
because the sum is not certain.
A. Secondarily liable
A. True; False B. Tertiary liable
B. False; True C. Primarily liable
C. Both statements are true. D. Not liable
D. Both statements are false
4.This is not negotiation of a negotiable instrument:
11. Due to Maria Santos P5,000 on December 1,
2009. A. Assignment
Sgd. A B. Delivery of a hearer instrument
C. Endorsement completed by delivery of an
Statement 1. This is a negotiable bill of exchange instrument payable to order
because it does not contain a promise to pay. D. Delivery of an instrument to the payee.

Statement 2. This is nevertheless a promissory note 5. A check drawn by the bank upon itself and
but it is not negotiable because it is payable to a third person.
payable to order.
A. Certified check C.Traveler’s check
A. True; False B. Cashier’s check D.Manager’s check
B. False; True
C. Both statements are true. 6. A issues a bill payable to the order of B. Later B
D. Both statements are false without endorsing the bill transfers for a
consideration said bill to C. The following
except one, are the valid effects of the transfer:

By Diaz A. C acquires the right to have the endorsement

of B
1. Which of the following is not requisite to B. The bill is merely assigned and not
consider a person an accommodation party? negotiated
C. C becomes a holder
A. He must not be liable to a holder in due D. The transfer vests in C such title as B had
course. thereon.
B. He must be a party to the instrument signing
as a maker, drawer, acceptor or indorser.
C. He must not receive value therefore.
D. He must sign for the purpose of lending his
name or credit.
7. The following are instances when a bank may B. No, because D knew by prior
refuse to pay checks drawn against it, except endorsement that A is merely a trustee for B and
one: has
no right to negotiate the instrument
A. If there is a “stop payment” issued by the C. Yes, because D acquired the instrument for
drawer value
B. When the bank receive notice of the D. No, because D did not get the consent of B
drawer’s death
C. If the drawer’s deposit is sufficient
D. If the drawer is insolvent 11. Atoy issued a bearer note to Boy. The note is
negotiated by delivery by Boy to Cris to Doc, by
8. A issues a bill payable to the order of B. Later B Doc to Ely, by Ely to Fe the holder. Fe can hold
without endorsing the bill transfers for a liable:
consideration said bill to C. The following except
one, are the valid effects of the transfer: A. Cris C. Doc
B. Ely D. Boy
A. C acquires the right to have the endorsement
of B.
B. The bill is merely assigned and not CPAR
negotiated. 12. An indorsement “Pay to A without recourse”.
C. C becomes the holder Sgd. B is a
D. The transfer vests in C such title as B had
thereon. A. Facultative indorsement
B. Restrictive indorsement
9. A issued a promissory note to the order of B for C. Qualified indorsement
P10,000 payable after 30 days after date. Later B D. Special indorsement
endorses it to C. Then X stole the note from C,
forged the signature of C and negotiated it to D, and 13. - If an authorized agent signs for and on behalf
D to E, E to, the holder. On maturity of the note, of his principal, the latter will be liable, as a
which of the following statements is not correct and rule.
invalid?
- A person who signs a trade or assumed name
A. F can collect from either D or E, because the will be liable to the same extent as if he had
signature are genuine and the note is signed in his own name.
operative against them.
B. F can collect from A because A cannot put A. True; True C. True; False
up forgery as his defense. B. False; True D. False; False
C. F cannot collect from C it was C’s signature
which was forged 14. A issues a bill payable to the order of B. Later
D. F cannot collect from B because B is a party B, without indorsing the bill transfers for a
prior to the forgery consideration said bill to C. As a result, one of the
following is not correct.
10. An instrument is indorsed as follows: “Pay to A,
for B” (Sgd) C. Then A indorsed the instrument A. The bill is merely assigned and not
“Pay to D” (Sgd) A, in payment of A’s personal loan negotiated
to D, the instrument was accepted by D as indorsed B. The transferee acquired such title as the
by A. Is D acting in good faith when he accepted the transferor had therein
instrument as indorsed? C. Transferee acquired the right to have the
indorsement of the transferor
A. Yes, because D is a holder in due course D. C is an assignee with the rights of a
holder in due course
15. A delivers to B a promissory note payable to the
order of B without specifying the amount but A
authorized B to place the amount of P500 in the
promissory note which was signed by A. B, in
violation of the instruction of A placed P5,000 as
the amount payable. Later B indorsed the note to C,
the holder C
A. Can recover from from either A or B
B. Cannot recover from either A or B, if he
knows the defect
C. Cannot recover from A but can recover
from B if he knows the defect
D. Cannot recover from A but can recover from
B if he does not know the defect
By Diaz
19. One of the following is not a restrictive
indorsement
A. Constitutes the indorsee the agent of the
indorser
B. Vests the title in the indorsee in trust for or
for the use of some other person
C. Prohibits the further negotiation of the
instrument
D. Payable to the indorsee where the
indorser is not liable
20. A made a promissory note payable to the order
of B. A delivered it to B who negotiated it to C. C
indorsed the note to D who is 16 years old. D
indorsed it to E who later indorsed it to F, the
holder. F presented the note to A who dishonored
the instrument. Which is correct?

16. In a joint obligation, A, B and C are debtors of A. F can hold B and C liable but not D and E
joint creditors D, E and F in the amount of B. F can hold liable D and E but not B and C
P180,000. A’s obligation is: C. D’s indorsement passes title to E and F
making D liable as indorser
A. Pay D P60,000 D. F can hold all indorsers liable except D.
B. Pay D, E anf F, P180,000
C. Pay D P120,000 21. – A buys a diamond for P50,000 for which A
D. Pay D P20,000 issued a check. The diamond turned out to be
an ordinary glass.
By Diaz
- B obtained the signature of C for autograph
17. A real defense purpose. B wrote a promissory note above the
signature, then indorsed the note to E, a
A. Fraud in inducement holder in due course.
B. Absence or failure of consideration
C. Want of delivery of a complete instrument A. Both are real defenses
D. Minority B. Both are personal defenses
C. Personal defense; Real defense
18. A personal defense D. Real defense; Personal defense

A. Want of delivery of an incomplete 22. A issued a negotiable promissory note to B.

instrument There was a total failure of consideration. B
B. Fraud in factum or fraud in esse contractus indorsed the note to C, a holder in due course. C
C. Forgery indorsed the note to D who knew of the failure of
D. Filling of blanks contrary to authority consideration. Which is correct?
given or not within a reasonable time
A. D may collect from A
B. D may collect only from C
C. D may collect only from B
D. D may collect from either B or C but not
from A
23. Which of the following is not correct in so far as 26. – If a bill of exchange is accepted at the instance
the rights of a holder not in due course are of the holder, the drawers and indorsers are
concerned? discharged.

A. He may sue on the instrument in his own - If a check is accepted at the instance of the
right holder, the drawers and indorsers are
B. He may receive payment and if payment is discharged.
in due course, the instrument is discharged
C. He can not recover on the instrument A. True; True C. True; False
D. He is entitled to the instrument but holds it B. False; True D. False; False
subject to the defenses as if it were non-
negotiable 27. Not primarily liable on the instrument

24. On January 28, 2010, A issues a bill payable to
the order of B. On February 7, 2010, B without
indorsing the bill transfers for a consideration said
bill to C. On February 15, 2010,
B indorses the bill to C. C becomes a holder on
A. February 7, 2010 and it is at that time that
the law will determine whether or not he is a
holder in due course.
B. February 7, 2010 but the law will determine
on February 15, 2010 whether or not he is a
holder in due course.
C. February 15, 2010 but the law will
determine on February 7, 2009 whether or not he is
a C.
holder in due course.
D. February 15, 2010 and it is at that time
that the law will determine whether or not
he is a holder in due course.
25. A certificate of stock is not a negotiable
instrument under the “Negotiable Instruments Law”
because it lacks the requirements of
A. Maker of a promissory note
B. Acceptor of a bill of exchange
C. Drawer of a bill
D. Certifier of a check
28. Which is not correct? The acceptor by accepting
the instrument
A. Admits the existence of the drawer, the
genuineness of his signature and his capacity and
authority to draw the instrument
B. Admits the existence of the indorser, the
genuineness of his signature and his capacity
and authority to draw the instrument
Admits the existence of the payee and his
then capacity to indorse
D. Engages that he will pay it according to the
tenor of his acceptance
29. Where the person not otherwise a party to the
instrument places thereon his signature in blank
before delivery he is liable as indorser, and if the
instrument is payable to the order of a third person

A. The instrument must be in writing and A. He is liable to the payee and to all
signed by the maker or drawer subsequent parties
B. It must be payable on demand, or at fixed or B. He is liable to all parties subsequent to the
determinable future time maker or drawer
C. It must be payable to order or bearer C. He is liable to all parties subsequent to the
D. It must contain an unconditional promise payee
or order to pay a sum certain in money D. He is not liable to any party
30. Where the person not otherwise a party to the
instrument places thereon his signature in blank
before delivery he is liable as indorser, and if the
instrument is payable to the order of the maker or
drawer, or its payable to bearer

A. He is liable to the payee and to all

subsequent parties
B. He is liable to all parties subsequent to
the maker or drawer
C. He is liable to all parties subsequent to the
payee
D. He is not liable to any party

31. Where the person not otherwise a party to the

instrument places thereon his signature in blank
before delivery he is liable as indorser, and if he
signs for accommodation of the payee

A. He is liable to the payee and to all

subsequent parties
B. He is liable to all parties subsequent to the
maker or drawer
C. He is liable to all parties subsequent to
the payee
D. He is not liable to any party