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Part 4 NEGOTIABLE iNSTRUMENTS
ANSWER KEY
Chapter 16 The Nature of Negotiable Instruments
Opening Case Questions
1. The lawsuit in this case involves negotiable instruments and is brought under the rules
A Question of Ethics
Special Directions to the Instructor: It is tough for a teacher to predict the wide variety of answers
that students will provide for the ethical question asked in the Question of Ethics feature in this chapter.
Questions for Review and Discussion
1. Under the UCC, a negotiable instrument is a written document signed by the maker that contains
4. The different kinds of drafts include sight drafts, time drafts, domestic bills of exchange, and
5. Negotiable instruments must (1) be in writing; (2) be signed by the maker or the drawer; (3)
6. A negotiable instrument is assigned when a person whose indorsement is required on an
instrument transfers it without indorsing it or when it is transferred to another person and does not meet
8. An indorser who receives consideration warrants that he or she has good title to the instrument,
that all signatures are genuine or authorized, that the instrument has not been materially altered, that no
Cases for Analysis
1. No. An instrument payable when a person reaches a certain age is not negotiable because the time
2. No. Negotiable instruments (except for checks) must be payable to order or to bearer. The words, “I
3. No. Negotiable instruments must be payable on demand or at a definite time. The time for payment
4. Yes. The handwritten note is a tangible form of writing. Any writing, mark, or symbol is accepted
5. The legal term that describes the transfer of the note from Gaff to Lai is assignment. It was not a
negotiation because to be negotiable, an instrument must be for a fixed amount of money, which is a
6. Yes. The indorsement was valid. When an instrument is made payable to a person under a
misspelled name or a name other than that person’s own, he or she may indorse in the incorrect name,
7. Yes. An indorsement can be written anywhere on the instrument. For convenience, an indorsement is
8. No. Although a qualified indorsement absolves the indorser from liability on the contract that
nonqualified indorsers make, it does not insulate the indorser from liability on the warranties made by
9. No. A holder is a person who is in possession of an instrument issued or indorsed to that person, to
END CHAPTER SIXTEEN
