Business Law, 8e: Chapter 21

Chapter 21
Negotiability:

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1. A holder of a negotiable instrument has all of the rights of an assignee under contract law, plus any additional rights conferred by Article 3 of the UCC.: a. True
b. False

2. In a negotiable instrument, the promise or order to pay must be unconditional.: a. True
b. False

3. A "signature" must be manually subscribed (handwritten) in order to satisfy the Uniform Commercial Code requirements as to what constitutes a signature.: a. True
b. False

4. The Interbank of New York v. Fleet Bank case involved the issue of whether a check was "signed.": a. True
b. False

5. An instrument violates the "sum certain" requirement if it provides for different interest rates at different times.: a. True
b. False

6. The law presumes that all promises to pay in negotiable instruments are unconditional.: a. True
b. False

7. An instrument that calls for payment in gold bullion is not negotiable.: a. True
b. False

8. Heidi ran out of her preprinted, standard form checks. To pay for groceries, Heidi wrote a check on a piece of notepaper. Heidi's check is not negotiable because it is not encoded with magnetic ink.: a. True
b. False

9. A promissory note calls for the payment of interest at "the current rate." Such a term provides a sum certain and does not affect negotiability.: a. True
b. False

10. Words on a check are more important than the numbers. If the words and numbers are in conflict, the words control.: a. True
b. False

11. Randi issued National Bank a promissory note for $120,000. The note stated a variable interest rate tied to the prime rate. Which statement is correct concerning the negotiability of the note?: a. The note is not negotiable because of the variable interest. The note does not state a fixed amount of money.
b. The note is not negotiable because the interest rate is tied to the prime rate. The four-corner rule requires that instruments contain every piece of information needed to determine the rights on the instrument.
c. The variable interest rate tied to the prime rate will not affect the negotiability of the note.
d. None of the above.

12. Dragamilov issued a warehouse receipt to Komarovsky. The warehouse receipt itemized the goods in storage, specified storage fees, and noted the location of the warehouse. It also states: "These goods shall be delivered by the bailee, Dragamilov, into the possession of the bailor, Komarovsky, upon Komarovsky's demand." Is the receipt negotiable?: a. Yes.
b. No, because it is not payable in money.
c. No, because it is not payable at a determinable time.
d. No, because the goods are not deliverable to the order of Komarovsky or bearer.

13. Amde Song issued the following instrument: This instrument:: a. is not negotiable because it does not call for payment of a sum certain.
b. is not negotiable because it does not contain words of negotiability.
c. is not negotiable because it is not payable at a determinable time.
d. is negotiable.

14. Which of the following statements on an instrument would make it conditional and thus not negotiable?: a. "Payment is to be made only if the goods conform to the contract dated 8/15/00."
b. "Payment of this instrument is governed by a sales contract dated 8/15/00."
c. "Payment of this instrument is secured by a security agreement dated 8/15/00."
d. Both a and b.

15. Which of the following terms can be included in an instrument without affecting the negotiability of the instrument?: a. "The collateral securing payment of this note may be sold in the event of a default on the instrument."
b. "The collateral securing payment of this note will be maintained and protected by the holder."
c. "The holder of this note has authority to confess judgment against the debtor in the event of default."
d. All of the above may be included without affecting negotiability.