Chapter 20
Introduction to Negotiables:
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1. Both drafts and promissory notes are negotiable instruments.
a. True
b. False
2. A payee is not liable on the instrument until the payee transfers the instrument.
a. True
b. False
3. A guarantor's liability is greater than that of the original debtor.
a. True
b. False
4. Negotiability is a characteristic of commercial paper.
a. True
b. False
5. If an instrument is nonnegotiable, the rights of the parties are governed by the general principles of contract law.
a. True
b. False
6. The signature on an instrument must appear at the lower right-hand corner of the face of the instrument.
a. True
b. False
7. In a negotiable instrument, the promise or order to pay must be unconditional.
a. True
b. False
8. A document of title states that the goods received will be delivered to the bearer or to the order of any named person.
a. True
b. False
9. A common carrier who delivers goods to the wrong person is liable for breach of contract and the tort of conversion.
a. True
b. False
10. A common carrier is liable for all delays in the delivery of goods.
a. True
b. False
11. The essential function of a document of title is to:
a. reflect the rights of the owner when the goods are turned over to the custody and care of a bailee.
b. serve as a substitute for cash in commerce.
c. provide concrete evidence of indebtedness.
d. evidence a pre-existing debt not yet paid.
12. Mai-Phoung arranged for Isaiah to deliver 1,000 pounds of herring to Natalie. Isaiah gave Mai-Phoung a negotiable bill of lading. Mai-Phoung negotiated the bill of lading to Natalie, who surrendered it to Isaiah when the herring was delivered. In this example, Isaiah is the:
a. consignee.
b. maker.
c. issuer.
d. consignor.
13. What is the difference between a drawer and a maker?
a. A drawer issues commercial paper under Article 3; a maker issues a document of title under Article 7.
b. A drawer issues promise paper; a maker issues order paper.
c. A drawer issues time instruments; a maker issues demand instruments.
d. A drawer issues order paper; a maker issues promise paper.
14. Donnie has a checking account at Great State Bank. He wrote a check to Sunshine Grocery Store for $54.93. In this situation:
a. Donnie is the drawee, Great State Bank is the drawer, and Sunshine Grocery is the payee.
b. Donnie is the maker, Great State Bank is the drawee, and Sunshine Grocery is the payee.
c. Donnie is the drawer, Great State Bank is the drawee, and Sunshine Grocery is the payee.
d. Donnie is the payee, Great State Bank is the drawer, and Sunshine Grocery is the maker.
15. A __________ is an unconditional written promise made by one person to another, signed by the maker, that promises to pay on demand a specific sum of money to the bearer.
a. promissory note.
b. certificate of deposit.
c. negotiable draft.
d. bill of exchange.
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