1ST Prelims Nego

FIRST PRELIMINARY EXAMINATION LAW ON NEGOTIABLE INSTRUMENTS
PREPARED BY: MGP CASTILLO
PART I Modified True or False: Identify whether the statement is true of false, if
false modify the statement to make it correct.
1. An instrument contains a promise or order to pay a sum of money which is

subject to a condition is negotiable as long as the condition happens.
2. An instrument when no time for payment is expressed is payable on demand.
3. An instrument payable to a specified person or his agent is payable to order.

4. The negotiable character of an instrument is not affected by the fact that it is not
dated.
5. A bill of exchanged which is address to two or more drawees alternatively does

not affect the negotiable character of an instrument.
6. Where the name of payee does not purport to be the name of any person, the
instrument is payable to bearer.
7. Where an instrument is payable to order of a “fictitious person”, the instrument

is still payable to bearer although such person is actually existing as long as he
was not the intended recipient of the payment.
8. A bearer negotiable instrument is converted into an order negotiable instrument

if it is specially indorsed.
9. An order instrument becomes a bearer instrument if one of several

endorsements is endorsement in blank.
10. The ante-dating or post-dating of an instrument does not render it invalid

provided it is not done for an illegal purpose.
11. An instrument that is incomplete but delivered, when completed without

authority, shall be considered to have been completed with authority in the
hands of a holder due course.
12. An instrument that is complete but undelivered shall be considered validly

delivered if it is in the handoff a holder due course.
1
13. If the amount due on an instrument is payable in installments, the amount and
maturity of each installment must be stated so that the negotiable character of
the instrument will not be affected.
14. When there is a conflict between the written and printed provision of an
instrument, the printed provision will prevail.
15. When an instrument provide for the payment of interest without specifying the
date from which the interest is to run, the interest runs from the date of the
instrument.
16. When an instrument provides is not dated, it will be dated as the time it was
issued.
17. When the instrument containing the words “I promise to pay” is signed by two or
more persons, they are deemed to be jointly and severally liable.
18. When a signature is also paced upon the instrument that is not clear in what
capacity the person making in intended to sign, he is deemed to be an endorser.
19. When an endorsement is forge in a promissory note payable to bearer, the party
whose endorsement was forged and all parties prior to him may raise the
defense of forgery against any holder.
20. A pre-existing debt constitutes value and maybe the consideration of an

instrument.
21. Want or absence of consideration is a defense against a holder in due course.
22. A negotiable instrument may not be transferred by assignment.
23. A person signing an instrument as an agent is not liable thereon provided he is

duly authorized, discloses his principal, and indicates that he is signing as an
agent.
24. An endorsement made by a minor passes title to the instrument although he

himself does not incur any liability on the instrument.
25. A holder may still be a holder in due course even if the instrument is not dated.
2
PART II MULTIPLE CHOICE:
26. The following are essential requisites of a negotiable promissory note except
a. must be written and signed by the drawer
b. must contain an unconditional promise to pay a sum certain in money
c. must be payable upon fixed determinable future time.
d. must be payable to order or bearer
27. Which of the following is not an essential element of a bill of exchange?

a. must be written and signed by the drawee
b. must contain an unconditional promise to pay a sum certain in money
c. must be payable to order or bearer
d. drawee must be named therein
28. The following are negotiable except

a. “Pay to bearer Jose Cruz P 10,000 upon demand”, signed by A and addressed
to B
b. “Pay to Jose Cruz or bearer P 10,000 upon demand”, signed by A and
addressed to B
c. “I oblige myself to pay Pedro Reyes or order P 3,000 ten days after day signed
by M as maker.
d. “Good to L or order P 5,000 July 1, 2009 signed by M as maker
29. Which of the following is negotiable?

a. “ I promise to pay Jose Cruz or order P 10,000 or deliver 1 cow 20 days after
date at the option of the holder” signed by M as maker
b. “Pay to Pedro Reyes or bearer P 10,000 or deliver 1 cow on 4-4-10 at the
option of the drawee”, signed by A and addressed to B
c. “Pay to Pedro C. Cruz or order P 5,000 out of fund I deposited with you”
signed by A and addressed to B
d. I promise to pay K. KHO or order P 10,000 in 5 installments, first installment
August 1, 2009 and every month thereafter, signed by M as maker
30. The following are functions of negotiable instrument; except:

a. used as substitute for money
b. medium of credit transactions
c. medium of exchange for commercial transactions
d. none of them.
3
31. Which of the following is no an incident in the life of negotiable instrument?

a, Issue c. Preparation
b. notice of dishonor d. Negotiation
32. Which of the following is negotiable?

a. Postal Money order
b. Certificate of stock
c. Treasury warranty
d. None of them
33. A promissory note is payable to bearer when:

a. It is payable to a person named therein or bearer
b. the only indorsement is blank
c. the name of payee does not support to be the name of a person
d. all of the above
34. Which of the following is false?

a. the acceptor is primarily liable
b. the drawer is secondarily liable
c. the issue is not negotiation
d. when the drawer and drawee are the same person the holder consider the bill
was a note
35. I promise to pay Jose Reyes or order P 10,000 ten days after the date signed by
M as maker. The note is undated. Which of the following is correct?
a. the note is non negotiable
b. the payee can require payment 10 days after issue
c. the payee can require payment at any time
d. the payee cannot negotiate the note
36. The negotiable promissory note signed by M as maker for P 10,000 is payable to
Jose Cruz or bearer on May 10, 2009. M however issued the note to the payee
May 15, 2009. In this case:
a. The instrument is considered non-negotiable because the date of issue is later
than the date of payment.
b. Cruz can ask for payment at anytime
c. Cruz can require payments only on May 15, 2009
d. Cruz cannot negotiate the note
4
PART III PROBLEMS AND ENUMERATION: Answer the following problem with
sufficient legal basis, merely answering yes or no will not be given any merits.
37. Suppose M makes a note for P10,000 with the name of the payee in blank and
keeps it in his drawer. P steals the note and inserts his name as payee and then
indorses the note to A, A to B, B to C, and C to D, a holder in due course. Can D
enforce the note against M? 5 points
38. From the previous problem, what is the right of D as a holder in due coruse? 5
points
39. M makes a note payable to the order of P and keeps it in his drawer. The
instrument is complete in all its particulars but P stole the note payable to him. P
negotiated the said note to A, A to B, B to C and C to D. D knows of the stealing
done by P. Can D collect from M? 5points
40. From the previous problem, what is the right of D if he has no knowledge of the
stealing by P? 5 pts
41. M authorized P to put in the blank of the promissory note only P1,000.00.
However, P inserts the sum of P2,000.00 and then indorse the note to A, from A
to B, and from B to C who is not a holder in due course. Can C collect from M? 5
pts
42. What if C is a holder in due course? 5pts
43. M makes a promissory note to P in payment for a parcel of land which does not
exist. P endorsed the note to C a holder in due course. Can C collect from M?
5pts
44. Distinguish an accommodation party from a regular party. 5 pts
45. What is a holder for value?
**nothing follows**

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FIRST PRELIMINARY EXAMINATION LAW ON NEGOTIABLE INSTRUMENTS

PREPARED BY: MGP CASTILLO

1. An instrument contains a promise or order to pay a sum of money which is

2. An instrument when no time for payment is expressed is payable on demand.

3. An instrument payable to a specified person or his agent is payable to order.

5. A bill of exchanged which is address to two or more drawees alternatively does

7. Where an instrument is payable to order of a “fictitious person”, the instrument

8. A bearer negotiable instrument is converted into an order negotiable instrument

9. An order instrument becomes a bearer instrument if one of several

10. The ante-dating or post-dating of an instrument does not render it invalid

11. An instrument that is incomplete but delivered, when completed without

12. An instrument that is complete but undelivered shall be considered validly

20. A pre-existing debt constitutes value and maybe the consideration of an

21. Want or absence of consideration is a defense against a holder in due course.

22. A negotiable instrument may not be transferred by assignment.

23. A person signing an instrument as an agent is not liable thereon provided he is

24. An endorsement made by a minor passes title to the instrument although he

PART II MULTIPLE CHOICE:

27. Which of the following is not an essential element of a bill of exchange?

28. The following are negotiable except

29. Which of the following is negotiable?

30. The following are functions of negotiable instrument; except:

31. Which of the following is no an incident in the life of negotiable instrument?

32. Which of the following is negotiable?

33. A promissory note is payable to bearer when:

34. Which of the following is false?

42. What if C is a holder in due course? 5pts

44. Distinguish an accommodation party from a regular party. 5 pts

45. What is a holder for value?

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