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1. The following are the conditions to constitute a holder in due course, except: 10. Which is available against any holder?
a. He took the instrument in good faith and for value. a. Failure or absence of consideration.
b. He has knowledge of infirmity in the instrument. b. Complete but undelivered instrument.
c. He took the instrument complete and regular in its face. c. Incomplete but delivered instrument.
d. He became the holder of the instrument before it was overdue. d. Incomplete and undelivered instrument.
2. A obtained the note of M through simple fraud and negotiates it to Z, Z to Y, Y to X, and X to E, the 11. These statements are presented to you:
present holder. Which is correct? A) Minority is a real defense available against a holder in due course. B) Prior parties of a minor
a. E is presumed a holder in due course. indorser can set-up minority as a defense against a holder in due course.
b. E is a mere holder for value only. a. Both statements are true.
c. E must prove that he is actually a holder in due course. b. Both statements are false.
d. All are correct. c. Only statement A is true.
3. The following are the rights of an ordinary holder, except: d. Only statement B is false.
a. He may sue on the instrument on his own name. 12. Gloria makes a promissory note for Three Million to the order of Benigno. To secure Benigno’s debt to
b. He may receive payment in due course in effect discharges the instrument. Mar of Two million, he pledges the note to Mar as a security.
c. He may enforce payment for the full amount thereof against all parties liable thereon. A) Mar may recover Three Million, holding the surplus One million for Benigno, if the note matured.
d. He holds the instrument subject to the same defenses as if it were non-negotiable. B) If Gloria has defense of failure of consideration against Benigno, Mar can collect Two Million if
4. A) Notice of defect or infirmity to an agent is deemed a notice to the principal. he is a holder in due course.
B) Notice to a partner is a notice to the partnership. a. Both statements are true.
C) To constitute a notice of defect, holder must have actual knowledge. b. Both statements are false.
a. Only A and B are incorrect. c. Only statement A is true.
b. Only A and C are correct. d. Only statement B is false.
c. All are correct. 13. A) A payee may be a holder in due course. B) A drawee may be a holder in due course.
d. All are incorrect. a. Both statements are true.
5. Jeff issues a promissory note payable to the order of Ancheta. Ancheta indorses in blank to Ryan. Paul b. Both statements are false.
stole the promissory note from Ryan and delivered the note to Mansano, a holder in due course. c. Only statement A is true.
Mansano delivered to Joseph, who was informed by Ryan that said note was stolen. d. Only statement B is false.
a. Joseph can collect from Jeff. 14. Mahal signed a promissory note for P500, 000 as maker, and payable to bearer, delivered to Belo in
b. Joseph cannot collect from Jeff. payment for Mahal’s scheduled medical operation that will make her tall. Later, Mahal was informed
c. Joseph should ran after Paul for payment. that it is impossible to make her tall. However, Belo has already delivered the note to Haden upon the
d. Both B and C are collect. terms of payment of P 300, 000 and the balance in a month. Haden received notice of the defect.
6. Dan, a holder in due course, came to Nick, the maker, for collection of payment. In order for Nick to Which is true?
escape liability, which defense can he interpose against Dan. a. Haden can collect P 500, 000 because he is a holder in due course entitle to the full amount of
a. Failure of consideration the instrument.
b. Want of delivery but complete instrument b. Haden must pay the balance before he can collect for the full amount.
c. Fraud in essecontractus c. Haden is a holder in due course to the extent of P300, 000, the amount paid by him.
d. Spoliation d. Haden cannot collect because of the failure or absence of consideration.
7. Joey upon hearing that his best friend is in need of money issued a check payable to his best friend 15. A holder is not deemed a holder in due course, except:
Romel. Romel, for consideration, indorsed it to Dondy, an ordinary holder. The following are all a. When instrument is payable on demand is negotiated payable on demand is negotiated in an
correct, except: unreasonable length of time after its issue.
a. Joey cannot be liable to Dondy. b. Where instrument taken by a holder, who has not yet paid anything, and he receives notice of
b. Romel was a holder for value. infirmity in the instrument.
c. Romel should be liable to Dondy. c. Where a holder took instrument for value and in good faith.
d. If Dondy is a holder in due course, Joey can be held liable to Dondy. d. Where a postal money order is delivered to Ryan, the holder.
8. Which of the following is not a right of a holder in due course? 16. Forgery is the counterfeit-making or fraudulent alteration of writing and may consist in the signing of
a. He can hold the instrument free from defect of title of prior parties. another’s name or the alteration of an instrument in the name, amount, description of the person and
b. He can hold the instrument free from personal defenses. the like, with intent thereby to –
c. He can hold the instrument free from real defenses. a. defraud
d. He can enforce payment of the instrument for the full amount thereof against all parties liable b. dishonor
thereon. c. confound
9. Amer made a promissory note indicating that Nass is the maker and is payable to order of Amer. Amer d. alter
forges Nass’ signature. Amer indorses the note to Norsad and Norsad to Ahmed, the present holder. 17. What kind of defense is forgery under Section 23 of the Negotiable Instrument Law?
a. Whether Ahmed is a holder in due course or not, he cannot collect to Nass. a. Forgery can be presumed and the burden of proof lies on the party alleging forgery.
b. Whether Ahmed is a holder in due course or not, he can collect to Nass. b. Forgery is a real defense which means that it could be raised against any holder, including a
c. Whether Ahmed is a holder in due course or not, he can collect to Amer. holder in due course.
d. Ahmed can collect to Nass, provided he is a holder in due course.
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c. Section 23 purports to declare neither the instrument totally void nor the genuine signatures d. Fraud in factum
thereon inoperative. 25. The effects of forgery of a signature are as follows except:
d. Forgery is a real or absolute defense except a holder in due course as provided in Sec. 58. a. That the signature forged or made without authority is wholly inoperative
18. One of the various kinds of forgery is Simple forgery. b. That no right to retain the instrument, or to give discharge thereof,
1: It occurs when a person signs the name of another without the authority of the person whose c. to enforce payment thereof
signature it purports to be. 2: Simple forgery also occurs when the person to whom the d. When the party against whom it its sought to enforce such right is precluded from setting up the
instrument has been delivered impersonated the real person named as payee and signs his forgery or want of authority as a defense.
name. 26. A holder in due course holds the instrument free from any defect of title of prior parties and free from
a. Both statements are true. defenses available to prior parties among themselves. An example of such a defense is –
b. Both statements are false. a. duress amounting to forgery
c. Only statement A is true. b. fraud in inducement
d. Only statement B is true. c. alteration
19. What kind of forgery is covered by Section 23 of the Negotiable Instruments Law? d. fraud in esse contractus
a. Section 23 applies only to forgery of signature 27. Forgery of bills of exchange may be subdivided into, a) forgery of an indorsement on the bill and b)
b. Section 23 applies both to forgery of signature and and alteration of the instrument forgery of the drawer’s signature, which may either be with acceptance by the drawee, or
c. Section 23 covers only alteration of instrument a. with acceptance but the bill is paid by the drawee.
d. Section 23 covers neither alteration and forgery b. without acceptance but the bill is paid by the drawer.
20. The rules on liabilities of parties on a forged documents in a bill of exchange are: c. without acceptance but the bill is paid by the drawee.
Statement A: the drawer’s account cannot be charged by the drawee where the drawee paid d. with acceptance but the bill is paid by the drawer.
Statement B: the drawer has no right to recover from the collecting bank 28. In case the bill is originally payable to bearer, the drawee may debit the drawer’s account in spite of
Statement C: the payee can recover from the drawer the forged instruments. The reason is that:
Statement D: the payee can recover from the receipt of the payment, such as the collecting bank a. the forged instruments is necessary to the title of the holder.
a. All statements are true. b. the drawee can recover from the holder.
b. Both statements A and B are true. c. the forged instruments is not necessary to the title of the holder. The drawee cannot recover
c. Both statements A and C are true. from the holder.
d. Both statements B and C are true. d. the drawee cannot recover from the holder since the forged instrument is necessary to the
e. All statements are false. holder.
21. A signature which is forged or made without the authority is wholly inoperative. 29. The following are precluded from raising the defense of forgery except:
a. Only the signature forged or made without authority is inoperative, the instrument or other a. The forger as he cannot raise his own malfeasance as a defense
signatures which are genuine are affected. b. The indorsees and persons negotiating the instrument by delivery as they do not warranted that
b. Signature made with authority is inoperative. the instrument is genuine and in all respects what it purports to be.
c. A signature which is not forged or made with authority is wholly inoperative. c. Those who are barred by estoppels or by their own negligence from raising the defense of
d. Signature forged or made with authority is wholly operative. forgery.
22. R, debtor of S, wrote a promissory note payable to the order of S. T, S’s brother, misrepresenting d. The acceptor with respect to the signature of the drawer as he admits the existence of the
himself as S’s agent, obtained the note from R, then negotiated it to A after forging S’s signature. A drawer, the genuineness of his signature, and his capacity and authority to draw the instrument.
indorsed it to B, who indorsed it to F, a holder in due course. May F recover from B? 30. The rules on liabilities of parties on a forged documents in a promissory note are:
a. Yes, since the signature of S is immaterial, he being the payee. A: A party whose indorsement is forged on a note payable to order and all parties prior to him
b. No, since the forgery of S’s signature results in the discharge of B. including the maker can be held liable by any holder.
c. Yes, since only the forged signature is inoperative and B is bound as indorser. B: A party whose indorsement is forged on a noted originally payable to bearer and all other
d. No, since the signature of S, the payee, was forged. parties prior to him including the maker may be held liable by the holder in due course provided
23. A found a check on the street, drawn by B against CHI Bank, with C as payee. A forged C’s signature that it was mechanically complete before the forgery.
as an indorser then indorsed it personally and delivered it to MET Bank. The latter, in turn, indorsed it C: A maker whose signature was forged cannot be held liable by any holder.
to CHI Bank which charged it to the B’s account. B later sued CHI Bank but it set up the forgery as its a. All statements are true.
defense. Will it prosper? b. Both statements A and B are true.
a. Yes, since forgery is only a personal defense. c. Both statements A and C are true.
b. Yes, since CHI Bank is bound to know the signature of B, its client. d. Both statements B and C are true.
c. No, since B’s remedy is to run after the forger, A. e. All statements are false.
d. No, since the payee’s signature has been forged. 31. Forged signature makes the instrument
24. Suppose C represents himself as Alex Santos when he is not to B. Due to such misrepresentation, he a. wholly inoperative
obtained from B a note payable to the order of Alex Santos. If B intends that the proceeds of the note b. unenforceable
will go to the real Alex Santos and not C, but to whom B issued the note on the belief that C was Alex c. invalid
Santos, would be a forgery. This is an example of: d. none of the above
a. Fraudulent impersonation 32. Forgery is a real or absolute defense when
b. Fraud amounting to forgery a. drawer is guilty of negligence
c. Double intent in fraudulent impersonation b. drawer whose signature was forged
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c. drawee’s negligence 42. Forgery is real defense when
d. a&b a. it can be presumed
e. b&c b. could be raised against any holder, including a holder in due course
33. If a bank pays a forged check c. raised against a holder
a. bank is liable d. none of the above
b. drawee bank bears the loss 43. Irrespective of good faith in paying a forged check
c. drawee bank considered as paying out of its funds a. bank is not liable
d. b&c b. bank is liable
e. all of the above c. bank and drawer are liable
34. for bearer instrument the signature of payee or holder is d. b&c
a. unnecessary to pass title to the instrument e. none of the above
b. essential to transfer title to the instrument 44. Forgery is committed through
c. necessary to indorse the instrument a. dishonor of checks
d. unnecessary to indorse the instrument b. counterfeit and alteration
e. none of the above c. counterfeit-making or fraudulent alteration of writing and may consist in the signing of another’s
35. Indorser of order instrument warrants that name or the alteration of an instrument in the name, amount, description of the person and the
a. instrument is genuine and in all respect what it purports to be like, with intent thereby to defraud
b. has a good title to it d. none of the above
c. all prior parties had capacity to contract 45. Condition which bars a party from setting up the defense of forgery
d. instrument is valid and subsisting a. guilty of negligence
e. all of the above b. guilty of fraud
36. In the case of PNB vs. CA, for order instruments the signature of its rightful c. a&b
order is d. none of the above
a. unnecessary to pass the title to the instrument 46. A person becomes a party to an instrument by:
b. essential to transfer title to the instrument a. certifying a check
c. necessary to indorse the instrument b. accepting the instrument in which case the party becomes an acceptor
d. unnecessary to indorse the instrument c. indorsing a bill or note
e. none of the above d. signing the instrument
37. Payment under a forged instrument is 47. The following are true about promissory note except:
a. violation of a bank’s duty a. It must be in writing and signed by the maker.
b. not the drawer’s order b. The maker is the primary liable as he is the one to whom the holder will look first for payment
c. drawee’s bank right to reimbursement and the one expected to pay.
d. none of the above c. Due presentment and due notice of dishonor are required for the purpose of charging the maker
38. In the case of Samsung vs. FEBTC, drawee who has paid upon the forged with liability.
signature bears the loss except when d. A person placing his signature on the face of a note is prima facie a maker and liable as such.
a. drawee’s negligence 48. A drawer’s liability to the holder arises after the following conditions are complied with except:
b. negligence can be traced on the part of the drawer a. The bill is presented for acceptance or for payment, as the case may be, to the drawee.
c. a&b b. The drawer promise to pay the bill absolutely whether it was accepted or paid.
d. none of the above c. The bill is dishonored by non-acceptance or non-presentment, as the case may be.
39. Fiduciary relationship exists between a bank and depositor where d. The necessary proceedings of dishonor are duly taken
a. simple care and diligence is required 49. What may be the liability of the drawee to the drawer before acceptance?
b. extraordinary care and diligence is required a. A drawee is only secondary liable he is not obligated to the payee or any holder to accept the bill
c. highest degree of care and diligence is required b. A drawee of the bill is not liable to the drawer before acceptance, his liability arises only if he
d. b&c accepts by which he becomes an acceptor.
40. Concept of general indorser guarantees c. A drawee may be liable to the drawer for breach of contract if he refuses without valid reason to
a. all prior indorsements accept the bill.
b. only present indorsements d. A drawee is primarily bound on the instrument whether he accepts it or not.
c. all prior indorsements including forged indorsement 50. X draws on Y a bill for P1,000 payable 30 days after sight. If Y accepts the bill for P500 only, can the
d. None of the above payee hold Y liable to the other P500 that he did not accept?
41. Chain of liability in cases involving forged indorsements a. Yes. When Y accepted the bill, he becomes primarily bound on the instrument and he engages to
a. does not end with the drawee bank and pass liability back through the collection chain to the pay it according to its terms, subject to no condition whatsoever.
party who took from the forger and to the forger himself b. No. Y as an acceptor engages to pay only according to the tenor of his acceptance.
b. ends with the drawee bank c. Yes. Because no one else would pay the balance of P500 other than Y.
c. does not end with the drawee bank and collect reimbursement d. No. X, as a drawer, is the one primarily liable.
d. a&c Answer questions no. 51 and 52 based on the case in no. 50.
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51. In no. 50 case, supposed W, the payee, altered the bill which was originally P1,000 to P1,500 and is b. indorsers without any knowledge of any fact which would impair the validity of the instrument
accepted by Y for P1,500, how much is Y liable to A, a holder in due course – for P1,000 or P1,500? or render it useless.
a. Y should be liable to A for P1,500 because it is the tenor of his acceptance. c. indorsers who is obliged to pay.
b. Y should be liable to A for P1,000 only because the collectible debt is only P1,000 d. indorsers between the drawer and the holder.
c. Y should be liable to A for P1,500 because Y, as an acceptor, assented to the alteration. 60. A qualified indorser is liable to the following except:
d. Y should be liable to A for P1,000 only because a holder in due course may enforce payment of a a. Lack of good title to the instrument indorsed
materially altered instrument according to its original tenor only. b. lack of capacity to contract on the part of prior parties
52. If Y merely signs the bill as acceptor, when would Y be bound to pay? c. insolvency of the person primary liable
a. As soon as he accepts it. d. forgery
b. 30 days after sight. 61. Which of the following renders the instrument non-negotiable?
c. After due presentment. a. An indication of a particular fund our of which reimbursement is to be made
d. Only when he is able to do so. b. An indication of a particular account to be debited with the amount
53. The following are true about an indorser and a drawer, except: c. A statement of the transaction which gives rise to the instrument
a. An indorser and a drawer are similar in that they are both secondarily liable on the instrument. d. An order or promise to pay out of a particular fund
b. The liabilities of the drawer are conditional in the same manner as those of general indorser. 62. The following instruments were presented to you for evaluation:
c. An indorser and a drawer both have warranties. I. “Pay to the order of A, P20,000.”
d. An indorser and a drawer are parties to a bill. II. “Pay to the order of A P20,000 or deliver to him a piano of the same value, at his option.”
54. M makes a promissory note payable to bearer and delivers the same to P, who negotiates it to A by III. “Pay to the order of A P20,000 or deliver to him a TV of the same value.”
delivery. If the note is dishonored in the hands of A due to the insolvency of M, can A recover from P? IV. “Pay to the order of A a piano worth P20,000.”
a. Yes. By indorsing the instrument to A, P warrants payment of the instrument. Assuming all the other requisites of negotiability are present, which of the foregoing instruments are not
b. No. Because M, as the maker, is the one primary liable. negotiable?
c. Yes. Because if M is insolvent, P is the one secondary liable. a. Instruments I and II
d. No. By indorsing the instrument to A, P does not warrant the solvency of M. b. Instruments I and III
55. In no. 54 case, supposed the note is negotiated by P to A, and A to B, all by delivery, is P liable to B for c. Instruments II and III
concealing the fact that M is insolvent? d. Instruments III and IV
a. Yes. Because P indorsed the instrument notwithstanding the fact that M is insolvent. 63. The following are functions of a negotiable instrument. Choose the exception:
b. No. Because the warranties of P extend only to A, his immediate transferee. a. It is a substitute for money.
c. Yes. P and A are both liable to B as the general indorsers. b. It increases credit circulation.
d. No. Because M, as the maker, is the one primary liable. c. It increases purchasing power in circulation.
56. If an indorser writes in addition to his signature on the back of the instrument, “I hereby guarantee d. It extinguishes obligation if its delivery is accepted by the creditor.
payment of this instrument”, is he discharged from liability for lack of due presentment or due notice 64. Which of the following instruments is not negotiable for the reason that the instrument is not payable
of dishonor? at a determinable future time?
a. Yes. A person signing his name on the back of the instrument is a general indorser and liable as a. 30 days after demand, drawer A directs B to pay C or order P10,000.
such. Being an indorser, he is chargeable only after presentment and notice of dishonor. b. 20 days after the death of Z, I promise to pay to the order of B, P10,000. Sgd. Q
b. No. By guaranteeing the payment, he becomes a guarantor who is now jointly liable with the c. 10 days after A passes the Bar exams, I promise to pay to the order of B P10,000. Sgd. C Sgd. B
principal debtor. Answer: C
c. Yes. Since he did not expressly stipulate his intention to be bound as a guarantor. 65. Which of the following is negotiable?
d. No. He waives the need for presentment, protest, or notice of dishonor but his liability is only a. “I promise to pay B or order P20,000 if he will pass the Bar exams on 2013.” (Sgd.) A
subsidiary. b. “I promise to pay B or order P20,000 in four instalments.” (Sgd. A)
57. M issues a promissory note to P for P500 payable on demand. P indorses the note to A. Upon being c. “I promise to pay B or order P20,000, 30 days after the death of his father.” (Sgd.) A
sued by A, M claims that the agreement between him and P was to pay only P300. Is the defense of M d. “I promise to pay B, P20,000.” (Sgd.) A
correct? 66. Which of the following instruments is not negotiable for the reason that the instrument is not payable
a. Yes. Because he is the party privy in making the promissory note. at a determinable future time?
b. No. Because oral agreement is inferior to the actual figure on the instrument. a. “On the death of X. I promise to pay to the order of B P1,000.” (Sgd) A
c. Yes. Because P altered the amount payable. b. “On or before October 30, 2015, I will promise to pay B or his order P10,000.” (Sgd A)
d. No Because M admits the existence of P and his then capacity to indorse it. c. Sixty days after sight, I promise to pay to the order of B P5.000.” (Sgd.) A
58. R draws on W a bill for P500 payable 30 days after sight. Upon presentment for payment, W paid the d. “Ten days before the death of X, I promise to pay B or his order P10,000.” (Sgd. ) A
bill without proper acceptance. Is R discharged from his obligation? 67. Which of the following instruments is negotiable?
a. Yes. Because there is no debt anymore. a. “Pay to B or order P1,000 and reimburse yourself out of my money in your hands.” (Sgd.)A/(to C)
b. No. Because payment by the drawee may not be considered as equivalent of acceptance. b. “I hereby authorize you to pay P1,000 on your account to the order of X.” (Sgd.) A
c. Yes. Because payment amount to more than an acceptance. c. “I promise to pay X or order P1,000 in or before October 25.” (Sgd. )A
d. No. Because payment by the drawee does not imply assent to his obligation. d. “Please let the bearer have P1,000 and place to my account and you will oblige.” (Sgd.) A
59. The phrase "to any subsequent indorser" refers to: 68. A certificate of stock is not a negotiable instrument because it lacks the requirement of:
a. indorsers in good faith a. The instrument must be in writing and signed by the maker or drawer.
b. It must contain an unconditional promise or order to pay a sum certain in money.
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c. It must be payable to bearer or order. b. YES, the officers the officers who places their signature on the note are prima facie makers and
d. It must be payable on demand, or at fixed determinable future time. liable as such.
69. An instrument is considered payable on demand: c. NO, the officers in this case acted thus accommodation party thus, they are only secondarily
a. When no time of payment is required
liable.
b. When payable to order
c. When the last indorsement is in blank d. NO, the corporate has separate juridical personality distinct from its officers, thus, the officers
d. When the last indorsement is restricted signing the PN only acted as guarantor. Hence, liability is only secondary.
70. Which of the following is not negotiable? 77. Does the indorser warrant the solvency of the prior parties?
a. “Pay to C or order, P20,000 with interest at 2.5%.” To XY, signed: CB a. YES, in all cases.
b. “Pay to the order of C within six months from date the sum of P20,000 with interest at 12% per b. Yes, if he is a general indorser.
annum.” To TP, signed: XY.
c. No. The general indorser does not warrant solvency of prior parties.
c. “Pay to C or bearer P20,000 six months after date. If not paid on due date, I agree to pay
collection and attorney’s fees.” To MN, signed: DG. d. No, the indorser only warrants the solvency of the immediate transferor.
d. “Pay to C or order P20,000 on instalment.” To OP, signed: AB. 78. Who among the following is secondarily liable?
71. When is a negotiable instrument payable to order? a. Juan, the maker of a promissory note who thereafter delivered it to Pedro
a. When payable to the order of a specified person of to him or his order b. Bingo, the drawer of a bill payable to Carlos or order
b. When payable to the order of a fictitious or non-existing person, an such fact is known to the
c. Charlie, who accepts the bill of exchange payable to Darling or order
person making it
c. When the name of the payee does not purport to be the name of any person d. Denver, who is named as a drawee but refused to accept the instrument when presented by the
d. When the only or last indorsement is an indorsement in blank payee.
72. “I promise to pay to bearer, Juan dela Cruz, the sum of P20,000..” (Sgd.) Jose dela Cruz. The 79. X draws a check against his current account with Mayaman Bank in favor of Y. Although X does not
promissory note is: have sufficient funds, the bank honors the check when it is presented for payment. Apparently, X has
a. Negotiable promissory note payable on demand conspired with the bank’s bookkeeper so that his ledger card would show that he still has sufficient
b. Negotiable promissory note payable to order
funds. The bank files an action for recovery of the amount paid to Y because the case presented has
c. Negotiable promissory note payable to bearer
d. Non-negotiable no sufficient funds. Can Mayaman Bank recover from Y?
73. One of the requisites of a negotiable instrument is that it must contain an unconditional promise or a. YES, the bank can recover from Y, the latter being not a holder in due course.
order to pay a sum certain in money. Which of the following denoted non-negotiablity? b. YES, the bank can recover from Y there being no sufficient funds on the account of the drawer.
a. I promise to pay to the order of L the sum of $900 at the DBP Manila. c. NO, the bank cannot recover from Y, the former being a drawee-acceptor.
b. I promise to pay to the order of Y the sum of $600 and to deliver one-fourth of the rice harvest in d. NO, the bank cannot recover from Y, the former being negligent.
my farm.
80. The acceptor warrants the following EXCEPT
c. I promise to pay N or bearer in Manila the sum of P20,000 in Philippine pesos or in US dollars.
d. I promise to pay E or bearer the sum of P27,000 in Philippine pesos or in US dollars, at the option a. Existence of the drawer
of the holder. b. Genuineness of the indorser’s signature
74. “ I promise to pay to the order of X P10,000 30 days after date.” (Sgd.) Y, dated blank. c. Existence of the payee
“Pay to the order of X P10,000 30 days after sight.” To Y (Sgd.) Z, dated 08/30/2012. d. Authority and capacity to draw the bill
1st rule: The maturity date of the above promissory note will be counted 30 days from date of the
81. What is the liability of Portia to Shylock?
instrument. 2nd rule: The maturity date of the above bill of exchange will be counted 30 days from the
date the instrument is accepted by Y. a. Primary
a. Both rules are wrong. b. Secondary
b. Both rules are correct. c. Not liable at all
c. 1st rule is correct, 2nd rule is wrong. d. Discharged from payment thereof
d. 1st rule is wrong, 2nd rule is correct. 82. What is the liability of Juliet to Shylock?
75. Which of the following is non-negotiable?
a. Primary
a. “I promise to pay A or order P20,000.” (Sgd.) D
b. “I promise to pay A of order P20,000 on June 30.” (Sgd.) B b. Secondary
c. “I agree to pay to the order of A P30,000.” (Sgd.) B c. Not liable at all
d. “Good for P20,000 to A or order.” (Sgd.) C d. Discharged from payment thereof
76. On the right bottom margin of PN appeared the signature of the corporation’s president and treasurer 83. What is liability of Romeo to Shylock?
above their printed names with the phrase “and in his personal capacity.” The corporation failed to a. Primary
pay its obligation. Are the officers primarily liable? b. Secondary
a. YES, the president and treasurer acted as accommodation party. Accommodation party is c. Not liable at all
always primarily liable. d. Discharged from payment thereof
84. An indorser is liable to the following EXCEPT:
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a. All indorsers subsequent to him c. If presentment is excused or waived and the instrument is past due and unpaid.
b. All indorsers prior to him d. All of the above.
c. Any holder in any order 92. Who are entitled to notice of dishonor?
a. Maker
d. None of the above.
b. Acceptor
85. As a general rule, an agent or broker who negotiates an instrument without indorsement is liable as: c. Drawer, indorsers or their agents
a. Maker or drawer d. Drawee
b. Accommodation party 93. The Notice of Dishonor shall be in
c. General indorser a. Writing
b. Mere oral notice will suffice
d. Qualified indorser
c. Both a and b
86. The following are warranties provided by the person negotiating an instrument EXCEPT: d. None of the above
a. That the instrument is genuine and in all respects what it purports to be 94. When the maturity of payment falls on a Sunday, when shall be the presentment for payment?
b. That he has a good title to it a. The next succeeding business day.
c. That all prior parties had capacity to contract b. The last working day prior to that Sunday.
d. That he has knowledge of any fact which would impair the validity of the instrument or render c. The Friday before the Sunday.
d. The Saturday before the Sunday.
it useless.
95. The instrument without grace falls due on April 30, 2006 which is a Sunday, when shall be the
87. Can a collecting bank debit the account of the depositor when the check indorsed to it were forged? presentment for payment?
a. YES, because the depositor of a check as indorser warrants that it is genuine and in all respect a. Any time before the maturity date.
what it purports to be. b. April 30, 2006 for it is the maturity date.
b. YES, because the depositor of a check as holder warrants that the check is free from any defect c. May 1, 2006 for it is the next day after April 30, 2006 which falls on a Sunday.
that impair the validity of the instrument or render it useless d. May 2, 2006.
96. Is the Notice of Dishonor needs to be signed?
c. NO, the collecting bank was negligent, thus it cannot recover.
a. Yes, for a signature signifies acceptance.
d. NO, the collecting bank has no authority to debit until notice of dishonor has been given. b. No, a written notice that is not signed would not invalidate it.
88. Brad indorsed a check to Angelina. Julie stole the check from Angelina, forged the latter’s signature c. Yes, to be sure that there is consent from the person who issued it.
and indorsed it to Pitt. Holly Bank encashed the check upon presentment thereof by Pitt. Is the bank d. No, as long as it is in possession of a holder in due course.
liable? 97. Waiver of protest constitutes
A. Waiver of formal protest.
a. YES, it is the primary duty of the bank to know that the check was duly endorsed by the original
B. Waiver of presentment.
payee. C. Waiver of Notice of Dishonor.
b. YES, the bank who encashed a stolen check always bears the loss. a. A and B only.
c. NO, the bank is only bound to know the signature of the drawee, not of the payee b. B and C only.
d. NO, the bank can raise the defense of forgery since the payee’s signature was forged. c. A and C only.
89. The following are the liabilities of an acceptor EXCEPT: d. All of the above.
e. None of the above.
a. Engages to pay according to the original tenor of the bill
98. May a Bill of Exchange be addressed to more than one drawee?
b. Admits the existence of the drawer, the genuineness of his signature, and his capacity and a. Yes, as long as the drawees are not alternative or in succession.
authority to draw the instrument b. Yes
c. Admits the existence of the payee c. No, the drawee must be specific.
d. Admits the capacity of the payee to indorse. d. No, for it might cause confusion.
90. Mariah issued a check to Carrie. Carrie subsequently indorsed it to Celine. When Celine is about to 99. Instances wherein a bill of exchange may be treated as promissory note except
a. When the drawer and drawee are the same person.
encash the check, the drawee, Superbank refused to encash it due to insufficiency of funds. Celine
b. The drawee is a fictitious person
sued Carrie for payment of money. Carrie moved for dismissal of the case on the contention that c. When the drawee refuses to honor the bill.
Mariah is an indispensable party. Does the argument hold water? d. The drawee has no capacity contract.
a. YES, there is privity between the drawer and the holder 100. All are true about a check except
b. YES, the drawer is liable together with the indorser. a. Always drawn on a bank or banker.
b. Supposed to be drawn against previous deposit of funds.
c. NO, there is no privity between the drawer and the holder.
c. Payable on demand or at a fixed and determinable future time.
d. NO, indorsers are always secondarily liable. d. Need not be presented for acceptance
91. The following are instances when a negotiable instrument is considered to be dishonored, except: 101. In banking practice, a check will be considered stale if not presented for payment after its issue within
a. If it is not accepted when presented for acceptance. a. 1 year.
b. If it is not paid when presented for payment at maturity. b. 6 months.
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c. 4 months. d. It was delivered in order that the paper may be converted into a negotiable instrument
d. 8 months. 112. When may blanks in the document be filled?
102. The following are cases where notice of dishonor is not required to be given to an indorser, except a. When an instrument is wanting in any material particulars
a. Where the indorser is the person to whom the instrument is presented for payment. b. When an instrument is not delivered
b. When the drawee is a fictitious person and the indorser was aware of that fact at the time he c. When an instrument is negotiated
indorsed the instrument. d. When an instrument is assigned
c. When the holder is a holder in due course. 113. When an instrument is a mechanically incomplete but delivered instrument, any person who becomes
d. Where the instrument was made for his accommodation. a party thereto after its completion shall be liable to:
103. The following are effects of a bank certifying a check except a. A holder in due course
a. Making the bank primary liable on the check. b. Any holder
b. The drawer may issue a stop payment order. c. Maker
c. It discharges persons secondarily liable if procured by the holder. d. Indorser
d. It is equivalent to acceptance. 114. It operate as a prima facie authority to fill up an instrument as such for any amount
104. How shall a Notice of Dishonor be given to joint parties who are not partners? a. Indorsement
a. You can give the Notice to any of the parties. b. Signature
b. There should only be one specific person who shall accept the notice for the partners. c. Blank paper
c. Notice is not required to be given to all parties as long as it is given to the majority of the d. Delivery
parties. 115. Alteration by a stranger is called
d. Notice must be given to each of them unless one has the authority to receive it for the others. a. Spoliation
105. (1) A check is always drawn on a bank or banker and always payable on demand. (2) A bill of exchange b. Forgery
may not be drawn on a bank and need not be drawn against a deposit. c. Mechanical act
a. 1 is correct and 2 is wrong. d. Ultra vires act
b. 1 is wrong and 2 is correct. 116. This means the transfer of the possession of the instrument by the maker or drawer with the intent to
c. Both are correct. transfer title to the payee
d. Both are wrong. a. Delivery
106. The following are material alterations except: b. Issue
a. Substituting the words “or bearer” for “Order” c. Assign
b. Writing “protest waived” above a blank indorsement d. Transfer
c. Changing the date from which interest is to run 117. ABC signs a piece of paper and delivers it to XYZ with the intention of making the instrument
d. Changing “I promise to pay” to “we promise to pay negotiable
107. Any change in the instrument which affects or changes the the liability of the parties in any way. a. XYZ can fill it up for any amount
a. Material alteration b. XYZ has implied authority to complete it
b. Immaterial alteration c. A and B
c. Spoliation d. None of the above
d. Material particular 118. It is the first delivery of the instrument complete in form to a person who takes it as a holder
108. Changes in the following constitutes material alteration except a. Assignment
a. Date b. Negotiation
b. Sum payable c. Issuance
c. Interest d. Indorsement
d. Serial number 120. A signature on a blank paper delivered by the person making the signature in order that the paper may
109. When the date of the instrument is in blank. The ______ may fill the blank by writing the date intended. be converted into a negotiable instrument operates as a __________ authority to fill it up as such for
a. Payee any amount
b. Drawee a. Absolute
c. Holder b. General
d. Maker c. Special
110. What acts are necessary to complete an instrument? d. Prima facie
a. Mechanical act of writing, and delivery 121. The writing of the signature on a paper attached to the negotiable instrument
b. Mechanical act of writing, or delivery a. Allonge
c. Mechanical act of writing, and issuing b. Procuration
d. Mechanical act of writing, or issuing c. Forgery
111. In order that a person may have a prima facie authority to convert a signature on a blank paper into a d. alteration
negotiable instrument and fill it up for any amount, the following must be present. Except. 122. An instrument “Payable to Angel Locsin or order the sum of P1, 000. Signed X” is:
a. The blank paper bears the name of the payee a. non-negotiable
b. The blank paper bears the signature of the maker or drawer b. bearer instrument since it is an instrument payable to the order of a fictitious person.
c. It was delivered by the person making the signature c. negotiable because it complies with the requisites of negotiability.
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d. bearer instrument since the name of the payee does not purport to be the name of any person. c. Solidary Liability
123. The negotiable character of an instrument otherwise negotiable is not affected when it gives the d. Either Joint or Solidary Liability depending on the holder
______ an election to require something to be done in lieu of payment in money. 133. An instrument payable on February 29, 2015 is payable on:
a. Holder a. Either on February 28, 2015 or on March 1, 2015
b. Drawer b. Demand since the date February 29, 2015 does not exist
c. Drawee c. Date fixed by court
d. Maker d. February 29, 2016, the nearest year in which the month of February has 29 days
124. Which of the following is a negotiable instrument? 134. An instrument payable to ______ (blank) or order is:
a. Bonds a. Negotiable since the holder may insert the name of the payee
b. Postal Money Order b. A bearer instrument because the name of the payee does not purport to be the name of any
c. Trust Receipt person
d. Treasury Warrant c. Negotiable since it can be proven by extrinsic evidence who the intended payee is
125. The liability of the drawee is: d. Non-negotiable
a. Zero liability 135. If the signature is so placed upon the instrument that it is not clear in what capacity the person intended
b. Primary to sign, he is deemed:
c. Secondary before acceptance a. Not a party to the instrument
d. Secondary after acceptance b. A maker or a drawer
126. Which of the following is not a bearer instrument? c. Indorser
a. Pay to cash d. Holder in due course
b. Pay to the order of the king of Atlantis 136. Acceleration clause dependent on the ________ makes the instrument non-negotiable.
c. Pay to John Doe or order a. Holder
d. Pay to the bearer, X b. Maker or drawer
127. Insertion of a wrong date: c. Drawee
a. Avoids the instrument in the hands of a holder in due course d. All of the above since the time of payment is not on demand, or at fixed, or determinable future
b. Avoids the instrument in the hands of any holder time
c. Does not avoid the instrument in the hands of a holder in due course 137. Lando issued a promissory note in favor of Eva and authorized the latter to fill up the amount in blank
d. Does not avoid the instrument in the hands of any holder with his loan account in the amount of P10,000.00. However, Eva inserted P100,000.00 in violation of
128. Which of the following do not destroy the negotiability of an instrument? the instruction given to her by Lando. Eva negotiated the note to Juan who had knowledge of the
a. Alternative Drawees infirmity. Juan, in turn, negotiated the note to Danilo for value and who had no knowledge of the
b. Joint Drawees infirmity of the instrument. Supposed Danilo negotiated the note to Bobby for value but with
c. Drawees in succession knowledge of the infirmity, can Bobby enforce the note to Lando?
d. None of the above a. Yes, because Bobby took the instrument from Danilo, a holder in due course.
129. When no time for payment is expressed, it is: b. Yes, because Bobby did not participate in the breach of trust committed by Eva against Lando.
a. Payable on demand c. No, because Bobby had knowledge of the breach of trust committed by Eva against Lando.
b. Payable on a period fixed by the court d. No, because Lando is not a holder in due course.
c. Payable on the date subsequently agreed upon 138. Aldo purchase an overdue negotiable promissory note signed by Bobby. Therefore, Aldo is not a holder
d. Payable based on the circumstances of each instrument in due course. Can Aldo still enforce the instrument to Booby and held the latter still liable for the amount
130. Which of the following is not one of the requisites in order that an agent who signs a negotiable stipulated in the instrument?
instrument escapes personal liability? a. No, because the promissory note is already overdue.
a. Duly authorized b. No, because Aldo is not a holder in due course.
b. Such authorization must be in writing c. Yes, because the Negotiable Instrument Law does not provide that a holder who is not a holder
c. Adding words to his signature indicating that he signs as an agent in due course may not recover on the instrument in any case.
d. Disclosed his principal d. Yes, because Booby cannot raise the defense that the promissory note is overdue.
131. 139. Azalea has with her a postdated check in the amount of P10,000.00. Azalea needs money so she asks
I promise to pay X or order P 1,000. (Signed) Y Betty to discount her check. In return for Azalea’s check, Betty issued a check in favor of Azalea less the
To : Z agreed interest. Which of the following statement is not correct?
The instrument is: a. Betty is a holder for value if Azalea already encashed the check.
a. A promissory note since it contains the word “promise” b. Betty is a holder for value when the check she issued was impaired without her fault.
b. A bill of exchange because it is addressed to a drawee c. Betty is a holder for value if Azalea negotiated the check to a third person who is a holder in
c. Non-negotiable because it is ambiguous and therefore does not conform to the requisites of due course.
negotiability d. Betty can never be a holder for value.
d. Either a promissory note or a bill of exchange 140. Who is a “holder” contemplated in the Negotiable Instruments Law?
132. An instrument with the words “I promise to pay” signed by two or more persons give rise to: a. the payee in a bearer instrument
a. No Liability b. the payee or the indorsee of a bill or note who is in possession of the instrument, or the bearer
b. Joint Liability thereof
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c. the bearer of an order instrument
d. the holder of a bearer instrument
141. Guianne issued a postdated cross-check in favor of Ryan for the payment of dental chair which the
latter promised to deliver. Ryan negotiated the check to Jessica at a discount. Jessica did not ask Ryan
the purpose of crossing the check. Ryan, on the other hand, failed to deliver the dental chair so
Guianne ordered the drawee bank to “STOP PAYMENT” of the check. Efforts of Jessica to collect from
Guianne failed. Can Jessica be held Guianne liable for the amount of the check?
a. Yes, Guianne is liable for the check because Jessica is a holder in due course as the latter acquires
the check in good faith and for value.
b. Yes, Guianne is liable for the check because Jessica is a holder in due course as the latter
acquires the check without knowledge that a crossed check is issued for deposit only.
c. No, Guianne is not liable for the check because Jessica is not a holder in due course as the
instrument involved is a crossed check and was supposed to be for deposit only.
d. No, Guianne is not liable because Jessica even if the latter is a holder in due course.
142. Which of the ff is not a real defense and, therefore, may not be set up against a holder in due course?
a. incapacity as far as incapacitated person is concern
b. acquisition of instrument for an illegal consideration
c. want of delivery of incomplete instrument
d. forgery
143. Angelo draws a bill for P10,000.00 with Budoy as payee and Xavier as drawee. Budoy indorses the bill
to Cathy, who fails to give a value thereon. Cathy indorses the bill to Daniella who, on maturity date
pay the amount of P6,000.00 only. Five (5) days after such payment, Daniella learns that Cathy did not
give value for the instrument. Can Daniella be considered a holder in due course?
a. No, because when Cathy failed to give a consideration to Budoy the bill cease to become a
negotiable instrument.
b. No, because the instrument is already overdue when Daniella acquired the knowledge of the
infirmity of the instrument.
c. No, because Daniella is not a holder in due course.
d. Yes, but limited to the amount of P6,000.00 or the amount Daniella paid before she had
knowledge of the infirmity.
144. Which of the following instrument is complete and regular upon its face?
a. a trade acceptance dated September 20, 2012 and payable on December 20
b. a promissory note with alteration, but the court, upon inspecting the same, found that the
alteration was not apparent
c. an accepted bill where no drawee is named
d. a check containing unmistakable evidence on its face that it has been altered innocently
145. Which of the following statement is correct?
a. A claim of a holder in due course can still be defeated by the person primarily and secondarily
liable if the latter has in its favor personal and real defenses.
b. A claim of a holder in due course cannot be defeated by a real defense of forgery.
c. Forgery cannot be raised against a holder in due course.
d. A holder in due course is free from real defenses.
146. Alfo was indebted to Bugsy in the amount of P200,000.00. In order to raise funds to pay his obligation,
Alfo sold his old car to Chevy for P200,000.00 on September 15, 2012. Alfo promised to deliver the car to
Chevy on October 15, 2012. However, Alfo convinced Chevy to immediately issue a check and to make the
check payable to Bugsy. Chevy was informed that the check will be issued to pay for the loan of Alfo’s
outstanding obligation to Bugsy. Hence, Chevy issued a check in favor of Bugsy. The check was delivered to
Bugsy through Alfo. Bugsy and Chevy was not aware that at the time the car was sold to Chevy, it was
already destroyed by fire. Can Bugsy be considered a holder indue course?
a. No, because fraud was largely a factor for the issuance of the check.
b. No, because it is Alfo who is indebted to Bugsy and therefore the Bugsy should have inquire on
the purpose for the issuance of the check upon acquiring the knowledge that Alfo is not drawer
therein.
c. Yes, because Bugsy is not a party to the contract of sale entered into by Alfo and Chevy.
d. Yes, because Bugsy acquires the instrument in good faith and for value and regular on its face
and in good faith and for value.
147. Mary issues a note to Pedro, the payee, without consideration. Pedro, also without consideration,
indorses it Annie. But Annie, with value, indorses the note to Baby. Which of the following statement is
incorrect?
a. Baby is deemed a holder for value not only as regard Annie but also as regards Mary and Pedro.
b. Baby is deemed a holder for value only as regard Annie but not as regards Mary and Pedro.
c. If Baby is a holder in due course, he may enforce payment for the full amount of the note against
Mary, Pedro and Annie.
d. If Baby is not a holder in due course, Mary can set up the defense of want of consideration.
148. Supposed Mary makes a promissory note for P1,000.00 to the order of Pedro. Pedro pledges the note
to Annie to secure the payment of his debt of P800.00. The note is indorsed and delivered by Pedro to Annie.
Which of the following statement is correct?
a. If Mary has defenses against Pedro, indorser, such as absence of consideration, Annie cannot
collect on the note even if she is a holder in due course.
b. If Mary has defenses against Pedro, indorser, such as absence of consideration, Annie can
collect the full amount of P1,000.00 even if she is not a holder in due course.
c. On maturity of the note, even if the debt of P800.00 is not yet due, Annie may recover the full
amount of P1,000.00, holding the P200.00 for Pedro.
d. On maturity date of the note, Annie may only recover to the extent of P800.00 which is also the
extent of his lien.
149. Supposed Mary issues a note for P1,000.00 without placing her signature and the name of the payee.
Pedro stole the note, forged the signature of Mary and named himself the payee thereon. Pedro pledges
the note to Annie, a holder in due course, to secure the payment of his debt of P800.00. The note is indorsed
and delivered by Pedro to Annie. Can Annie may recover from the instrument?
a. Yes, Annie may recover P1,000.00 from Mary because she is a holder in due course.
b. Yes, because Annie is a holder for value to the extent of P800.00 which is also the extent of his
lien.
c. No, because as against Mary, Annie acquired no right to enforce the instrument because
forgery is a real defense and may be set up even against a holder in due course.
d. No, because the signature of Mary is inoperative.
150. Reema purchased from Banco ng Filipino a cashier’s check for P800,000.00. The check was stolen from
the Manager of Banco ng Filipino to whom Reema entrusted the check for safekeeping. Investigation
pointed to Amy as the culprit. Reema immediately demanded “stop-payment” order. Ben, the holder of
the check, when asked how he came to possess the check said that it was paid to him by Amy in a “certain
transaction” but refused to demonstrate further. Is Ben a holder in due course?
a. No, because Ben refused to say how and why the check was passed to him by Amy.
b. No, because from the moment the check was stolen, no one outside of Reema can be termed a
holder in due course as the latter had not indorsed it in due course.
c. Yes, because Ben acquired the check in good faith and for value.
d. Yes, because Ben had no knowledge that the check was stolen by Amy.
151. Kathleen is induced through simple fraud committed by Denise to issue a promissory note in favor of
the latter. Denise indorsed the note to Alva. Alva has noticed of the fraud but did not take part in it. Alva
indorsed the note to Betty, a holder in due course. Assuming Alva, with valuable consideration, reacquires
the note from Betty. Can Alva enforce the note against Kathleen?
a. Yes, because Alva acquires the note Carla, a holder in due course.
b. Yes, because Alva acquires the note in exchange for some valuable consideration. Thus, Alva
acquires the status of a holder in due course.
c. No, because Alva acquires the note in bad faith.
d. No, because the act of Alva in negotiating the note to a holder in due course in order to cut-off
Kathleen’s defense upon her reacquisition of the note may be considered fraud