Multiple Choice
1. Every year, creditors have to absorb in unpaid debt:
a. about $100 million
b. about $5 billion
c. over $20 billion
d. less than $5 million
e. about $20 million
2. Every year, creditors have to absorb in unpaid debt:
a. about $10 million
b. about $1 billion
c. about $20 million
d. about $50 million
e. none of the other choices are correct
3. The law of negotiable instruments has it origins in:
a. France
b. Rome
c. England
d. Spain
e. Ancient Greece
4. The law of negotiable instruments has its origins in:
a. France
b. Rome
c. Kenya
d. Spain
e. none of the other choices are correct
5. Before passage of laws affecting negotiable instruments:
a. the right to payment was a contract right that could not be sold
b. business was done on a cash basis only
c. businesses were required to maintain large cash reserves (or cash equivalents, such as land or other
property) as a guarantee of future payment for credit sales
d. it was possible to buy products internationally only by opening a letter of credit as a guarantee of payment
e. credit cards were the most common exchange form used
6. Negotiable instruments:
a. substitute for cash
b. are generally also gold certificates
c. make business deals more difficult
d. are part of federal regulatory controls
e. none of the other choices
7. Negotiable instruments function as:
a. substitutes for cash
b. credit devices
c. devices for making business deals easier
d. are subject to Article 3 of the UCC
e. all of the other choices
8. Negotiable instruments are not:
a. substitutes for cash
b. credit devices
c. devices for making business deals easier
d. generally subject to Article 3 of the UCC
e. none of the other choices
9. Negotiable instruments are not:
a. substitutes for cash
b. credit devices
c. subject to Article 2 of the UCC
d. devices for making business deals easier
e. all of the other choices
10. Negotiable instruments are a part of the commercial law through:
a. Article 2 of the UCC
b. Article 3 of the UCC
c. Article 3 of the CISG
d. Article 3 of the Constitution
e. Article 3 of the Universal Trade Code
11. Negotiable instruments are a part of the commercial law through:
a. Article 2 of the UCC
b. Article 3 of the Universal Trade Code
c. Article 3 of the CISG
d. Article 3 of the Constitution
e. none of the other choices are correct
12. A(n) functions as a substitute for cash.
a. parley
b. easement
c. negotiable instrument
d. notable instrument
e. credit instrument
13. A(n) functions as a substitute for cash.
a. parley
b. easement
c. debtor instrument
d. notable instrument
e. none of the other choices are correct
14. A(n) is a note promising to repay borrowed money, probably with interest.
a. negotiable instrument
b. negotiable note
c. promissory note
d. lending note
e. borrowing note
15. A(n) is a note promising to repay borrowed money, probably with interest.
a. negotiable instrument
b. negotiable note
c. borrowing note
d. lending note
e. none of the other choices are correct
16. A financial institution that receives a promissory note has the right to:
a. sell the note to another party
b. demand the U.S. Treasury redeem the note
c. change the interest terms of the note
d. demand repayment of the loan before the originally agreed upon time
e. none of the other choices are correct
17. If a negotiable instrument is , the assignee has the same contract rights and responsibilities as the assign-or.
a. assigned
b. delegated
c. returned
d. negated
e. realigned
18. If a negotiable instrument is
obligations.
a. transferred by assignment
b. transferred by negotiation
c. transferred by court
d. assigned
e. delegated
, the transferee takes the instrument free of any of the transferor’s contract
19. If a negotiable instrument is
obligations.
a. transferred by assignment
b. delegated
c. transferred by court
d. assigned
, the transferee takes the instrument free of any of the transferor’s contract
e. none of the other choices are correct
20. If an instrument is made , the party in possession is required only to deliver the instrument to transfer it.
a. “to transferee”
b. “to holder”
c. “to possessor”
d. “to bearer”
e. “to recipient”
21. If an instrument is made , the party in possession is required only to deliver the instrument to transfer it.
a. “to transferee”
b. “to holder”
c. “to possessor”
d. “to recipient”
e. none of the other choices are correct
22. Governments disfavor bearer instruments because:
a. transactions with bearer instruments are not taxable
b. transactions with bearer instruments are illegal
c. law enforcement agencies find it difficult to trace money transferred in bearer form
d. bearer instruments cannot be used to fund political campaigns
e. transactions involving bearer instruments are not covered by the UCC
23. Governments disfavor bearer instruments because:
a. transactions with bearer instruments are not taxable
b. transactions with bearer instruments are illegal
c. transactions involving bearer instruments are not covered by the UCC
d. bearer instruments cannot be used to fund political campaigns
e. none of the other choices are correct
24. Although commercial paper may be either negotiable or nonnegotiable, only fall under the UCC.
a. nonnegotiable instruments
b. negotiable instruments
c. real instruments
d. unconditional instruments
e. conditional instruments
25. Although commercial paper may be either negotiable or nonnegotiable, only fall under the UCC.
a. nonnegotiable instruments
b. conditional instruments
c. real instruments
d. unconditional instruments
e. none of the other choices are correct
26. Negotiable instruments are governed by:
a. the UCC
b. the CISG
c. the common law of contracts
d. the common law of arbitration
e. the Supreme Court
27. Negotiable instruments are governed by:
a. the Supreme Court
b. the CISG
c. the common law of contracts
d. the common law of arbitration
e. none of the other choices are correct
28. Nonnegotiable instruments are governed by:
a. the Supreme Court
b. the CISG
c. the common law of contracts
d. the common law of arbitration
e. none of the other choices are correct
29. Nonnegotiable instruments are governed by:
a. the Supreme Court
b. the CISG
c. the UCC
d. arbitration rules
e. none of the other choices are correct
30. Which of the following is one of the UCC’s requirements for an instrument to be negotiable:
a. it must be written
b. it must be an unconditional order or promise to pay
c. it must be signed by the maker or drawer
d. it must be payable on demand or at a specified time
e. all of the other specific choices are correct
31. Which of the following is one of the UCC’s requirements for an instrument to be negotiable:
a. it must be written
b. it must state a certain sum of money
c. it must be made out “to order” or “to bearer”
d. it must be payable on demand or at a specified time
e. all of the other specific choices are correct
32. Which of the following is one of the UCC’s requirements for an instrument to be negotiable:
a. it must be oral
b. it must not state a certain sum of money
c. it must be made out “to order” or “to bearer”
d. none of the other specific choices are correct
e. all of the other specific choices are correct
33. Which of the following is one of the UCC’s requirements for an instrument to be negotiable:
a. it must be oral
b. it must not state a certain sum of money
c. it must be payable on demand or at a specified time
d. none of the other specific choices are correct
e. all of the other specific choices are correct
34. Which of the following is one of the UCC’s requirements for an instrument to be negotiable:
a. it must be oral
b. it must state a certain sum of money
c. it need not be payable on demand or at a specified time
d. none of the other specific choices are correct
e. all of the other specific choices are correct
35. Which of the following is one of the UCC’s requirements for an instrument to be negotiable:
a. it must be written
b. it must not state a certain sum of money
c. it need not be payable on demand or at a specified time
d. none of the other specific choices are correct
e. all of the other specific choices are correct
36. To transfer an instrument made “to the order” of the payee, the payee must:
a. endorse the instrument
b. deliver the instrument to a third party
c. destroy the original instrument
d. both a and b are necessary
e. none of the other choices are correct
37. To transfer an instrument made “to the order” of the payee, the payee must:
a. endorse and deliver the instrument to a third party
b. have the instrument rewritten by a district court official
c. destroy the original instrument
d. create an addendum to the original instrument
e. none of the other choices are correct
38. To transfer an instrument made “to the order” of the payee, the payee must:
a. endorse, but not deliver the instrument to a third party
b. have the instrument rewritten by a district court official
c. destroy the original instrument
d. create an addendum to the original instrument
e. none of the other choices are correct
39. A(n) has the same contract responsibilities as an assignee under a nonnegotiable instrument.
a. holder in due course
b. ordinary holder
c. regular holder
d. nonnegotiable holder
e. temporary holder
40. A(n) has the same contract responsibilities as an assignee under a nonnegotiable instrument.
a. holder in due course
b. temporary holder
c. regular holder
d. nonnegotiable holder
e. none of the other choices are correct
41. Which of the following requirements is necessary to be a holder in due course:
a. the transferee must give value for the negotiable instrument
b. the transferee must take the instrument without knowledge that it is overdue or defective
c. the transferee must take the instrument in good faith
d. all of the other specific choices are necessary
e. none of the other specific choices are necessary
42. Which of the following requirements is necessary to be a holder in due course:
a. the transferee must give value for the negotiable instrument
b. the transferee know the transferer
c. the transferee must not take the instrument in good faith
d. all of the other specific choices are necessary
e. none of the other specific choices are necessary
43. Which of the following requirements is necessary to be a holder in due course:
a. the transferee must not give value for the negotiable instrument
b. the transferee know the transferer
c. the transferee must take the instrument in good faith
d. all of the other specific choices are necessary
e. none of the other specific choices are necessary
44. If a negotiable instrument is assigned, the assignee has:
a. the same contract rights and responsibilities as the assignor
b. the same contract rights as the assignor, but is relieved of assignor’s responsibilities
c. the same responsibilities as the assignor, but not the contract rights of the assignor
d. neither the rights or responsibilities of the assignors; those are determined by a new contract between the
parties
e. none of the other choices
45. If a negotiable instrument is assigned, the assignee has:
a. no rights or liabilities after assignment
b. the same contract rights as the assignor, but is relieved assignor‘s responsibilities
c. the same responsibilities as the assignor, but not the contract rights of the assignor
d. neither the rights or responsibilities of the assignors; those are determined by a new contract between the
parties
e. none of the other choices
46. If a negotiable instrument is transferred by negotiation, the transferee takes the instrument:
a. with all of the transferor’s rights and responsibilities
b. free of the transferor’s responsibilities
c. with the duties that have been assigned to the instrument by the bearer
d. with the rights that have been assigned to the instrument by the holder in due course
e. none of the other choices
47. If a negotiable instrument is transferred by negotiation, the transferee takes the instrument:
a. with all of the transferor’s rights and responsibilities
b. with all of transferor’s responsibilities, but none of the rights
c. with the duties that have been assigned to the instrument by the bearer
d. with the rights that have been assigned to the instrument by the holder in due course
e. none of the other choices
48. If an instrument is determined to be nonnegotiable, and a dispute arises, Article 3 will:
a. apply the same as it does in the case of disputes involving negotiable instruments with the exception that the
rights and remedies available to the parties are more flexible for nonnegotiable instruments under Article 3
(because the potential consequences to holders is less of a financial burden)
b. apply as long as the instrument has not been assigned to a third party
c. not apply and the parties will need to resolve their dispute with reference to the common law of contracts
d. not apply and the parties will resolve their dispute with reference to the sale of goods under Article 2
e. none of the other choices
49. If an instrument is determined to be nonnegotiable, and a dispute arises, Article 3 will:
a. apply the same as it does in the case of disputes involving negotiable instruments with the exception that the
rights and remedies available to the parties are more flexible for nonnegotiable instruments under Article 3
(because the potential consequences to holders is less of a financial burden)
b. apply as long as the instrument has not been assigned to a third party
c. not apply, the parties refer to the rules of the Chamber of Commerce
d. not apply and the parties will resolve their dispute with reference to the sale of goods under Article 2
e. none of the other choices
50. Besides being written, an unconditional order or promise to pay, must be made out for a definite sum of money. To
be negotiable under Article 3 of the UCC, an instrument also must meet which of the following requirements it:
a. must be payable on demand or at a specified time period
b. must be made out “to order” or “to bearer ”
c. must be signed by the maker or the drawer
d. must be payable on demand or at a specified time period and must be signed by the maker or the drawer
e. must be payable on demand or at a specified time period and must be signed by the maker or the drawer and
must be made out “to order” or “to bearer”
51. Payment practices vary around the world. Islamic law is interpreted by many Muslims to mean that interest
payments are prohibited by the Koran. In practice, this means that in countries that practice Islamic law:
a. there is no borrowing or lending
b. all borrowing is done at zero interest rate
c. borrowing is done by lending arrangements that pay the equivalent of interest
d. interest payments must be donated to religious organizations
e. none of the other choices
52. If an instrument is found to be negotiable under the UCC, it may be freely traded without concern for any existing
contract responsibilities if the instrument is in the possession of a holder in due course. To be a holder in due course,
one must:
a. accept the transfer of the instrument with the same contract responsibilities as the person assigning the
instrument
b. give value for the instrument, accept it without knowledge of any defects (for example, that it is overdue),
and take the instrument in good faith
c. present himself as having knowledge or skill specialized to the transaction and regularly deal in that kind of
transaction
d. demonstrate that the instrument falls within the scope of Article 3 of the UCC, that the transaction is not for
the sale of a tangible product, and that any defects in the title to the goods involved in the transaction is not
known to the party
e. none of the other choices, there are no special requirements
53. If an instrument is found to be negotiable under the UCC, it may be freely traded without concern for any existing
contract responsibilities if the instrument is in the possession of a holder in due course. To be a holder in due course,
one must:
a. accept the transfer of the instrument with the same contract responsibilities as the person assigning the
instrument
b. receive the instrument as a gift in good faith with no liabilities attached
c. present himself as having knowledge or skill specialized to the transaction and regularly deal in that kind of
transaction
d. demonstrate that the instrument falls within the scope of Article 3 of the UCC, that the transaction is not for
the sale of a tangible product, and that any defects in the title to the goods involved in the transaction is not
known to the party
e. none of the other choices
54. TP sells franchises in the Old Fast Food chain. TP sells a franchise to Choi for $100,000 by cashier’s check. Choi
then hears that TP is going out of business and tries to stop payment on the check. TP has already transferred the
money to a third party who meets the UCC’s requirements for a holder in due course. The bank paid that third
party. TP declares it is out of business. In a subsequent lawsuit:
a. the court will find that the third party is a holder in due course and, despite the fact that TP has defrauded
Choi, not require the third party to repay Choi
b. because of the fraud involved, the court will require the third party repay Choi
c. because the instrument involved was a cashier‘s check and not an ordinary check, the court will not require
the third party to repay Choi
d. because the amount in controversy was more than $50,000, the courts will be empowered to view the fraud
as a felony and will ignore the requirements of the UCC
e. none of the other choices
55. TP sells franchises in the Old Fast Food chain. TP sells a franchise to Choi for $100,000 by cashier’s check. Choi
then hears that TP is going out of business and tries to stop payment on the check. TP has already transferred the
money to a third party who meets the UCC’s requirements for a holder in due course. The bank paid that third
party. TP declares it is out of business. In a subsequent lawsuit:
a. the court will find that the third party liable as surety
b. because of the fraud involved, the court will require the third party repay Choi
c. because the instrument involved was a cashier‘s check and not an ordinary check, the court will not require
the third party to repay Choi
d. because the amount in controversy was more than $50,000, the courts will be empowered to view the fraud
as a felony and will ignore the requirements of the UCC
e. none of the other choices
56. To be found a holder in due course, a transferee must:
a. be in possession of an instrument in the form of either a draft or a check (but not a note) made out “to bearer
”
b. have agreed in writing not to be bound as a contractual assignee
c. have given value for the negotiable instrument, taken it without knowledge of any defects and in good faith
d. provided a signed unconditional writing, promising (or ordering to pay), at a specified time in the future and
made out “to order” or “to bearer “
e. all of the other choices are required to be a holder in due course