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MULTIPLE CHOICE

1. Presentation for payment may be waived expressly or impliedly; and in such

a case, if there is no presentment-
(a) Parties secondarily liable will be discharged
(b) Parties primarily liable will not be discharged
(c) Parties primarily liable will be discharged
(d) Parties secondarily liable will not discharged

2. X makes a promissory note payable to bearer and delivers the same to Y. Y

indorse it to Z in this manner: Pay to Z, Sgd. Y. Later Z, without indorsing
the promissory note, transfers and delivers the same to R. X subsequently
dishonors the note.
(a) R may not hold X liable as there was no valid negotiation of the
note.
(b) R may not hold X liable as the special indorsement of Y
converted the note to one that is payable to order
(c) R may hold X liable since the note is payable to bearer on its
face and the special indorsement of Y did not affected the right
of the holder to negotiable it by mere delivery.
(d) R may hold X liable as the transfer and delivery of the note to R
by Z constituted a valid negotiation, vesting in R all the rights of
a holder.

3. A makes a promissory note payable to bearer and delivers it to B. in turn B

negotiates it by mere delivery to C; who indorses it specially to D. D
negotiates it to F by mere delivery. A did not pay.
(a) D is only liable to E
(b) B and C are not liable to F
(c) D and E are not liable to F
(d) A is not liable to F

4. B forged As signature as drawer of a check drawn on Citibank. The check

was purportedly payable to the order of B. B then indorsed the check to C, a
holder in due course, who deposited the same to his account with BPI. The
check passed through the normal course of clearing and accordingly the
drawee Citibank credited the collecting bank BPI with the amount of the
check which Citibank in turn debited from As deposit. Upon receiving his
monthly statement from Citibank, together with the cancelled checks debited
from his deposit account, discovered the foregery.
Can A compel Citibank to re-credit to his account the amount of the forged
check?
(a) Yes, because of forgery
(b) No, because C is holder in due course
(c) Yes, because the check was actually cleared
(d) No, because it is the responsibility of the bank to examine the
check
5. Arman drew a bill of exchange, stating I promise to pay to the order of Bob
and Cathy (Sgd.). Arman. Bob and Cathy are not partners. Who should
indorse the instrument?
(a) Bob, provided he was authorized by Cathy.
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(b) Either Bob or Cathy, whoever is solvent.

(c) Both Bob and Cathy, because they are joint payees
(d) Both Bob and Cathy, because they are solidary payees.

6. A drawee is given-
(a) Twenty-four hours within which to accept a bill and the
effectively of an acceptance , if given, does not retroact to the
day presentment for acceptance was made
(b) Twenty-four hours within which to accept a bill and the
effectively of an acceptance , if given does not retroact to the
day presentment for payment was made
(c) Twenty-four hours within which to accept a bill and the
effectivity of an acceptance, if given, retroacts to the day
presentment for acceptance was made.
(d) Twenty-four hours within which to accept a bill and the
effectivity of an acceptance, if given, does not retroact to the
day presentment for payment was made.

7. A drawee who has not accepted a bill of exchange is not a party to the
instrument and cannot be held liable, whether primarily or secondarily,
except that

(a) He may be held liable by the drawee by reason of the instrument.

(b) He may be held liable by the holder by reason of an independent
agreement or arrangement between them.
(c) He may be held liable by the holder by reason of the instrument.
(d) He may be held liable by the drawer by reason of an independent
agreement or arrangement between them.

8. The indorsement pay to Ultimate Bank for collection and deposit only,
without recourse to me is
(a) Blank-qualified-restrictive.
(b) Special-qualified-restrictive
(c) Special-qualified-non-restrictive
(d) Special-unqualified-non-restrictive

9. One of the following is not primarily liable on a negotiable instrument.

(a) Drawer of a bill
(b) Maker of a promissory note
(c) Acceptor of a bill of exchange
(d) Certifier of a check

10.What is the liability of a drawee?

(a) None, until he accepts the order to pay
(b) None, until he is furnished a notice of dishonor
(c) None, until the negotiable instrument is presented to him for
payment
(d) None, until the negotiable instrument is presented to him for
acceptance.
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11.Notice of dishonor given by the maker or acceptor to a party secondarily

liable will discharge the latter since-
(a) The former are not entitled to give notice of dishonor.
(b) The former are only entitled to make presentment for payment.
(c) The former are not entitled to receive notice of dishonor.
(d) The former are the ones entitled to receive notice of dishonor.

12.Ariel issued a note to Brando. There was a total failure of consideration.

Brando issued the note for consideration to Cecil who is a holder in due
course. Cecil indorsed the note to David who knew of the failure of
consideration. Can David successfully collect from Ariel?
(a) No, because David knew the failure of consideration.
(b) No, although David acquired the rights of Cecil, a holder in due
course and he was not a party to any illegality.
(c) Yes, because David acquired the note for consideration.
(d) No, because David is not a holder in due course.

13.One of the following is not entitled to a notice of dishonor.

(a) Maker
(b) Drawer
(c) Indorser
(d) Irregular indorser

14.A draws a bill payable to B or order with X, as the drawee. The bill was
successively indorsed to C, D, E and F holder. X does not pay and F has duly
protested non-payment. Y pays for the honor of C.
Which of the following statement is wrong?
(a) D is discharged.
(b) E is discharged.
(c) C is discharged.
(d) Y can ask reimbursement from A.

15.The following is not a condition for one to be considered a holder in due

course:
(a) That he became the holder of it before it was overdue and with
notice that it had been previously dishonored if such was the
fact.
(b) That it is complete and regular upon its face.
(c) That he took it in good faith and for value.
(d) That at the time it was negotiated to him, he had no notice of
any infirmity in the instrument of defect in the title of the
person negotiating it.

16.Notice of dishonor given by the maker or acceptor to a party secondarily

liable will discharge the latter since-
(a) The former are not entitled to give notice of dishonor
(b) The former are only entitled to make presentment for payment.
(c) The former are not entitled to receive notice of dishonor
(d) The former are the ones entitled to receive notice of dishonor.
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ESSAY

1. A, a professional basketball player, and B,, a well-unknown sports columnist

entered into a business venture, Rebound Corp., a production outfit that produces
concerts and basketball games. In order to defray the expenses of Rebound, A
issued several checks. Said checks were signed, but had no name of the payee,
amount, or date. A issued the instruction to B not to fill out the checks without
notifying A.
Instead of using the checks for the expenses of Rebound, B used the checks
for a loan on the construction of his house, delivering said checks to C payable to
cash. The cash were dishonored but the drawee bank.
(i) Is C a holder in due course?
(ii) May C hold A liable for the instrument? May A set up defenses, if any?
(iii) Will A ne relieved from liability on the checks?

2. What is the effect of an illicit/unlawful consideration?

3. What is the effect on the instrument of a forged signature?

4. Who are precluded from setting up the defense of forgery?

5. Is the accommodation party is liable to a holder even if he is not a holder in

due course, provided he is a holder for value?

6. What are the modes of negotiating negotiable instruments?

7. What is the liability of the acceptor of an instrument with a fictitious drawer?

8. When is the notice of dishonor not necessary to be given to an indorser?

9. How does the shelter principle embodied in the Negotiable Instruments Law
operate to give the rights of a holder-in-due course to a holder-in-due course to a
holder who does not have the status of a holder in due course? Explain briefly.

10. When may a bill of exchange be treated as a promissory note?