WEEK 14

QUIZZER IN NEGOTIABLE INSTRUMENTS LAW – Part 2

SET A
For numbers 1 to 7, determine if:
A. Both statements are false.
B. First statement is true, second statement is false.
C. First statement is false, second statement is true.
D. Both statements are true.

1. 1st - Protest is not necessary in cases of inland bills and promissory notes
2nd -A promissory note should be presented for acceptance to make the maker primarily liable

2. 1st - Check must be presented for payment within a reasonable time after its last negotiation
2nd - Duress amounting to forgery is real defense

3. 1st - “Pay to Megan for my use. Sgd. Marvin” is an example of a qualified indorsement
2nd - An order instrument that will be indorsed by restrictive indorsement will cease to be negotiable

4. 1st - Presentment for acceptance of a bill of exchange is not necessary when the bill is payable after sight
2nd - A promissory note is discharged upon payment by maker on or before maturity date

5. 1st - Notice of dishonor is not part of the incidents in the life of a promissory note
2nd - Fraud in factum is an example of a personal defense.

6. 1st - If the instrument is payable to the order of the maker, he must indorse the instrument for negotiation
purposes.
2nd - The acceptor by accepting the instrument admits the existence of the endorser, the genuineness of his
signature and his capacity and authority to draw the instrument

7. 1st -. Before there could be an acceptance for honor of a bill, the said bill must be overdue
2nd - In a bill of exchange, the drawer is not liable.

8. X appointed Y as his agent to buy 1,000 sacks of rice. Thereafter, Y drew a bill of exchange for the price of
the sugar in favor of S, the seller. X accepted the bill. After the acceptance of X, S negotiated the bill to H, a
holder in due course. When the rice was delivered, X refused to pay the bill on the ground that the rice was
deteriorated. Is X liable?
A. No, the rice was defective
B. No, there is an absence of consideration
C. Yes, even if the consideration failed because H is a holder in due course.
D. No, because there is failure of consideration.

9. Which of the following is not a secondary party?

A. Acceptor for honor. C. Payor for honor.
B. Drawer. D. Endorser.

10. A makes a promissory note payable to B or order. Indorses the note to C, then C to D, D to E and E to F,
the holder in whose hands the note is dishonored. F notifies B, C, D and E about the dishonor of the note
and subsequently indorses it to G. Which is not correct?
A. The notice to E inures to the benefit of D
B. The notice to C inures to the benefits of D, E and G.
C. The notice given by F to B inures to the benefits of C, D, E and G.
D. The notice to D inures to the benefits of E and G.

SET A
11. X issued a note to Y. There was a total failure of consideration. Y indorsed the note for a consideration to Z
who is a holder in due course. Z indorsed the note to A who knew of the failure of consideration. Can A
successfully collect from X?
A. No, because A is not a holder in due course.
B. No, because A knew of the failure of consideration.
C. Yes, A acquired the rights of Z, a holder in due course and he was not a party to any illegality.
D. Yes, because A acquired the note for a consideration.

12. Which of the following is not a requisite to consider a person an accommodation party?
A. He must be a party to the instrument signing as a maker, drawer, acceptor, or endorser.
B. He must not receive value therefore.
C. He must not be liable to a holder in due course.
D. He must sign for the purpose of lending his name or credit.

13. This is not negotiation of a negotiable instrument:

A. Delivery of a bearer instrument.
B. Assignment.
C. Endorsement completed by delivery of an instrument payable to order.
D. Delivery of an instrument to the payee.

14. A issues a bill to the order of B, and B indorses it to C. C indorses the bill to D, D to E and E indorses the bill
to F, the holder. Which of the following is not true, if F decides to strike out any endorsement not necessary
to his title?
A. If F cancels the endorsement of D; D and E are relieved from liability.
B. If F cancels the endorsement of B; B, C, D and E are relieved from liability.
C. If F cancels the endorsement of B, B is relieved from liability.
D. If F cancels the endorsement of E; E is relieved from liability.

15. X issues a bill payable to the order of Y. Later Y without endorsing the bill transfers for a consideration said
bill to Z. The following except one, are the valid effects of the transfer:
A. Z becomes a holder.
B. Z acquires the right to have the endorsement of Y.
C. The bill is merely assigned and not negotiated.
D. The transfer vests in Z such title as Y had thereon.

16. X issued a bearer note to Y. The note is negotiated by delivery by Y to Z to A, by A to B, by B to C, the

holder. C can hold liable
A. X and B C. B only
B. X, Y, Z, A and B D. Nobody

17. The following, except one, are the rights of a holder in due course. Which is the exception?
A. He holds the instrument subject to the same defenses as if it were non-transferable.
B. He may enforce payment of the instrument for the full amount thereof against all parties liable thereon.
C. He may receive payment and if payment is in due course, the instrument is discharged.
D. He may sue on the instrument in his own name.

18. A holder not in due course has the following rights, except
A. He cannot recover on the instrument.
B. He may receive payment and if the payment is in due course, the instrument is discharged.
C. He may sue on the instrument in his own name.
D. He is entitled to the instrument that holds it subject to the same defense at if it were non-negotiable.

19. X obtains the signature of Y for autograph purpose. X writes a negotiable promissory note above Y's
signature. The note was validly negotiated to Z who is a holder in due course. What kind of defense can Y
avail against Z?
A. Personal defense. C. Equitable defense.
B. Real defense. D. Qualified defense.

20. Which of the following is an example of Real Defense?

A. Acquisition of the instrument by force.
B. Fraud in factum.
C. Acquisition of the instrument for illegal consideration.
D. Fraud in the endorsement.

21. Which of the following is not a personal defense?

A. Absence of consideration.

SET A
 B. Non-delivery of a complete instrument.
C. Forgery of a signature.
D. Failure of consideration.

22. X makes a promissory note for P3,000 payable to the order of Y. Y negotiates the note to Z who with the
consent of Y raised the amount to P30,000 and thereafter endorses it to A, A to B, and B to C, who is a
holder in due course. In this case
A. C can recover P3,000 from X.
B. C can recover P30,000 as against X.
C. X and Y are liable to C for P3,000
D. A and B are not liable to C.

23. X makes a P10,000 note payable to the order of Y who indorses it to Z. A obtains possession of the note
fraudulently, forges Z's signature, alters the amount to P100,000 and endorses it to B who in turn endorses
to C. In this case:
A. C cannot enforce the note against any person.
B. C can enforce the note against X and Y.
C. C can enforce the note against A.
D. C cannot enforce the note against B.

24. X makes a note payable to the order of Y who indorses it to Z. A obtains possession of the note fraudulently,
forges Z’s signature and indorses it to B who in turn indorses it to C. In this case, C can enforce the
instrument against
A. X and Y. B. X but not Y C. A but not D. A and B

25. If the instrument is payable to the order of a third person, the irregular endorser is:
A. Liable to all parties subsequent to the payee.
B. Liable to the payee and to all subsequent parties.
C. Not liable to any party.
D. Liable to all parties subsequent to the maker or drawer.

26. 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 payee and his capacity to indorse.
C. Admits the existence of the endorser, the genuineness of his signature and his capacity and authority to
draw the instrument.
D. Engages that he will pay it according to the tenor of his acceptance.

27. Case 1: Megan buys a diamond ring from Riza for P50,000 for which she issued a check. Later Megan
found out the diamond to be an ordinary glass.
Case 2: Marilou obtains the signature of Ronald for autograph purpose. Marilou writes a promissory note
above Ronald's signature and endorses the note to Kyla, a holder in due course.

What kind of defenses may be availed of by the parties?

A. B. C. D.
Case 1 Real Personal Real Personal
Case 2 Personal Real Real Personal

28. X executed a promissory note payable to the order of Y. Y negotiated the note to Z in this manner:
“Pay to Z if he will marry my daughter” (Sgd) Y. In this case:
A. The instrument is rendered non-negotiable
B. The right can only be transferred by assignment
C. Z cannot further negotiate the instrument
D. The instrument can be enforced anytime from issuance

29. In which of the following situations will a forged signature may transfer title?
A. Unnecessary to one’s title as when a bearer instrument contains a forged indorsement
B. Procured by force or duress
C. A mere simulation or counterfeit
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

30. Y executes a check drawn against Asenso Bank and payable to the order of X. Later, Z stole the check and
forged the indorsement of X. Z deposited the check in Pabaya Bank by way of savings deposits. When the
check was cleared, Z withdrew the money from Pabaya Bank. Who shall bear the loss?
A. Y, because the check was complete when delivered to X
B. Pabaya Bank, because it is bound to investigate the genuineness of the indorsement

SET A
 C. Asenso Bank, because the indorsement of the payee was forged
D. Y, X, Z, Asenso, and Pabaya pro-rata

31. When a bill of exchange is payable on demand, presentment must be made

A. Within a reasonable time after the last indorsement thereof
B. On the day it falls due
C. Before the maturity date
D. Within a reasonable time after its issue

32. There is a need of presentment for acceptance, if the bill is

A. Payable on demand or sight
B. Payable at definite date
C. Payable in a number of days after a fixed event
D. Payable in a certain number of days after sight

33. A negotiable promissory note is given by A to B; B indorsed it to C; C to D and D to E. E negotiated back

the note to A. A re-negotiate the note to F. As a result.
A. The re-negotiation is not allowed because of confusion or merger which extinguished the obligation
B. If A later on pays the instrument, he cannot go after F, but he can go after B, C, D, and E
C. If A later on pays the instrument, he cannot go after B, D, C, E and F
D. If A later on pays the instrument, he can go after F, B, D, C and E

34. One of the following can set up the defense of forgery in an instrument payable to order. Who is it?
A. An endorser, if the maker’s signature is forged.
B. The maker, if an endorser’s signature is forged.
C. The acceptor, if the drawer’s signature is forged.
D. A person negotiating by mere delivery if a prior party’s signature is forged.

35. One of the following is not a restrictive indorsement. Which is it?

A. An indorsement that constitutes the endorser a mere assignor of the title to the instrument.
B. An indorsement that prohibits the further negotiation of the instrument.
C. An indorsement that constitutes the endorsee an agent of the endorser.
D. An indorsement that vests title in the endorsee in trust for some other person.

36. Which of the following statements pertaining to indorsements is incorrect?

A. The signature of the endorser without additional words is sufficient.
B. If an instrument is delivered without indorsement, negotiation takes effect at the time of delivery even
if the instrument is subsequently indorsed.
C. Endorsers are liable in the order in which they indorse.
D. The indorsement must be of the whole instrument.

37. Which of the following does not discharge the instrument?

A. When the principal debtor becomes the holder in his own right before maturity.
B. Payment in due course by the accommodated party.
C. Intentional cancellation of the instrument by the holder.
D. Payment in due course by or on behalf of the principal debtor.

38. M makes a promissory note payable to the order of P. P indorses the note specially to A, A indorses the
note in blank and delivers the same to B. B specially indorses the note to C, C delivers it to E, E specially
indorses the note to H, holder. Whose indorsement may H strike out?
A. The special indorsement of P to A.
B. The blank indorsement made by A.
C. The special indorsement of E to H.
D. The blank indorsement made by D.

39. A made a negotiable promissory note payable to the order of B, a minor. Later, B indorsed the note to C.,
then C to D and D to E. Which of the following is correct?
A. If E is aware that B is a minor, E cannot collect from A but can collect from D or E
B. If E is a holder in due course, E can collect from A, and if A dishonors by non-payment, E can collect
from B, C or D
C. The indorsement by B to C did not make C a holder
D. Regardless of whether E is a holder in due course or holder for value, E can collect from A

40. A negotiable instrument is not discharged

SET A
 A. By payment in due course by the party accommodated, where the instrument is made or accepted for
his accommodation
B. When the principal debtor becomes the holder of the instrument at or after maturity in his own right
C. By payment in due course by or on behalf of the principal debtor
D. By intentional cancellation thereof by the endorsers

41. M made a promissory note payable to P or bearer. P specially indorsed the note to A. A also specially
indorsed it to B, X stole the note from B and delivered it to C without any indorsement.
Who may be held liable to C?
a. M, P, A B, and X
b. X only
c. M and X only
d. M, P A and X only

42. An indorsement which attach no liability on the part of the indorser in case of insolvency of the person
principally liable.
A. special indorsement
B. qualified indorsement
C. restrictive indorsement
D. facultative indorsement

43. An indorsement where an endorser waives presentment and notice of dishonor and increases his liability
A. special indorsement
B. qualified indorsement
C. restrictive indorsement
D. facultative indorsement

42. Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an
acceptance for the honor of this party.
A. Drawer C. Maker
B. Endorser D. Acceptor

43. Where a bill payable after sight is accepted for honor, its maturity is calculated from what date?
A. Date of issue
B. First Presentment for Acceptance
C. Last negotiation
D. First indorsement

44. The indorsement “Pay to Megan for collection only. (Sgd). Nicole” is what kind of indorsement?
A. special indorsement
B. qualified indorsement
C. restrictive indorsement
D. facultative indorsement

45. Release of all parties, whether primary or secondary, from the obligations arising under the instrument. It
renders the instrument without force and effect and consequently, it can no longer be negotiated.
A. Indorsement
B. Negotiation
C. Issue
D. Discharge

46. Any change in the instrument which affects or changes the liability of the parties in any way.
A. Material Alteration
B. Forgery
C. Simulation
D. Negotiation

47. A kind of indorsement which constitutes the endorser as a mere assignor of the instrument.
A. special indorsement
B. qualified indorsement
C. restrictive indorsement
D. facultative indorsement

50 It is one composed of several parts, each being numbered and containing a reference to the other parts, the
whole of the parts constituting but one bill.

SET A
 A. Promissory note
B. Foreign bill
C. Bill in set
D. Bill of lading

SET A