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Exam 22: The Essentials of Negotiability

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Question 1

True/False

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The term fixed amount means an amount that is ascertainable from the instrument.

A) True
B) False

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Question 2

Multiple Choice

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Rick negotiates a bearer instrument to Shane by

A) delivery with an assignment of its rights under a contract.
B) delivery with any necessary indorsement.
C) delivery alone.
D) presenting it in response to a demand by Shane.

E) A) and C)
F) A) and B)

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Question 3

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Checks received as negotiable instruments act as extensions of credit.

Fact Pattern 22-2 LNG Corporation and Midstates Utility Company enter a contract for a sale of liquefied natural gas by LNG to Midstates. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft. Refer to Fact Pattern 22-2. On this instrument, LNG is

In an instrument, mere reference to another agreement does not affect negotiability.

Gwen deposits $5,000 with Home Bank on July 1, 2018. Home Bank promises to repay Gwen the $5,000 plus 1 percent annual interest on July 1, 2023. Home Bank has issued Gwen

Rico agrees to buy a bicycle from Salvatore for $250. Salvatore agrees to deliver the bike on September 1. Rico writes a draft for $250 payable to Salvatore on September 1. This is

A demand instrument is payable when payment is requested.

Mortgage notes tied a variable rate of interest are not negotiable.

To be negotiable, if an instrument is not payable on demand, it must be payable at a definite time.

An instrument that cannot easily be transferred in the ordinary course of business can still be negotiable.

Jane signs an instrument using a "J" with a swirl around it. With this mark for a signature, the instrument is

Gail owes $5,000 in unpaid taxes. Using the back of an old t-shirt, she exe-cutes an instrument for $5,000 that otherwise meets the requirements for negotiability. This instrument is likely

Barry draws a check payable to "Cash" and presents it to Dollars & Sense store for payment. This instrument is

With respect to negotiability, extreme latitude is granted in determining what constitutes a signature.

To be negotiable, a mere acknowledgement of a debt is sufficient.

A restrictive indorsement prohibits the further negotiation of an instrument.

On behalf of Bubbly Drinks Company, Calvin signs an instrument in which he promises to deliver 100 cases of soda as payment to Dispatch & Delivery, Inc., on April 1. This instrument is

Fact Pattern 22-1 Erin draws a check payable to "Foodland" to buy groceries. Refer to Fact Pattern 22-1. With respect to Erin's check, Foodland is

Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games. This instrument is