Union Christian College

NEGOTIABLE INSTRUMENT LAW

FINAL EXAM
st
1 Sem SY 2015-2016

I. TRUE or FALSE. Write on the space given whether the statement is True or
False. No erasures.

_______1. The maker of a promissory note is primarily liable to a negotiable instrument.

_______2. The drawer of a bill of exchange is primarily liable to a negotiable instrument.

_______3. The drawer can limit his liability to the holder and place across his signature
without recourse.

_______4. M issued a promissory note to P, a minor. P indorses it to X. X presented the

note for payment to M. In this case, M can validly claim that P, being a minor, cannot
enter into a contract; hence cannot validly indorse the note to X.

_______5. A drawee who accepts the instrument is primarily liable to a negotiable

instrument.

_______6. The drawee acceptor admits the genuiness of the indorsers signature.

_______7. A person placing his signature upon an instrument otherwise than as maker,
drawer, or acceptor, is deemed to be an indorser, unless he clearly indicates by
appropriate words his intention to be bound in some other capacity, is an indorser.

_______8. An party negotiating an instrument by delivery is liable on his warranties to

no holder other than his immediate transferee.

_______9. M issued a note to P. P indorses it to X. X made a qualified indorsement of

the note to Y. After the indorsement, X learned that M became insolvent. In this case, X
committed a breach of his warranty as the instrument was rendered valueless by reason
of Ms insolvency; hence, X is liable to Y.

_______10. M issued a note to P. P indorses it to X. X indorses of the note to Y. After

the indorsement, X learned that M became insolvent. In this case, X, being a general
indorser, committed a breach of his warranty, as the instrument cannot be paid by
reason of Ms insolvency; hence, X is liable to Y.

_______11. Where a person places his indorsement on an instrument negotiable by

delivery, he incurs all the liabilities of an indorser, depending on the manner of his
indorsement.

_______12. As respects one another, indorsers are liable prima facie in the order in
which they indorse.

_______13. Where a broker or other agent negotiates an instrument without

indorsement, he incurs all the liabilities prescribed by Section 65 of the NIL, unless he
discloses the name of his principal, and the fact that he is acting only as agent.

_______14. A bill of exchange is not required to be presented for acceptance if it is

payable on a definite time or date.

_______15. P presented a bill of exchange to EE, the drawee, for acceptance. EE took
the instrument and wrote Received this October 15, 2015 then signed it. In this case,
EE has accepted the instrument and engages to pay it in accordance to the tenor of his
acceptance.

_______16. ER draws a bill addressed to himself or upon himself. In this case,

presentment is still required to make the drawer liable.

_______17. As a rule, a bill addressed to two or more drawees, who are not partners,
presentment may be made to any of them.

_______18 If the drawee is already dead, presentment is excused and presentment to

his representative is optional.

_______19. Presentment to a drawee who has been adjudged insolvent is optional.

_______20. When a bill is dishonored by non-acceptance, no presentment for payment

is necessary.

_______21. Acceptance may be written on the bill itself or in a separate instrument.

_______22. An written unconditional promise to accept a non-existing bill is considered

an actual acceptance.

_______23. A drawee who destroys the bill is deemed to have accepted the same.

_______24. A drawee may make a qualified acceptance.

_______25. The holder is bound to accept a qualified acceptance.

_______26. A holders taking of qualified acceptance discharges the drawer and

indorsers liability on the bill, unless they authorized the holder to take a qualified
acceptance or subsequently assent thereto.

______27. When the drawer or indorser receives notice of a qualified acceptance, he

must, within reasonable time, express his dissent to the holder, or he will be deemed to
have assented thereto.

______28. A demand to pay without exhibition of the instrument is sufficient

presentment for payment.

______29. H presented for payment a note to M, the maker. However, M refused to pay.
H made a notice of dishonor to I, an indorser, who also refused to pay. H then filed a
case for collection against I in Court. I can validly set up a defense that H should have
been first brought against the maker.

______30. A negotiable instrument is discharged by payment in due course by or on

behalf of the principal debtor.

______31. If an instrument was paid by the maker before maturity, the maker can
negotiate it further.

______32. Only persons secondarily liable are given notice of dishonor.

NAME: ____________________________________
For the following questions (33 to 37), the basic facts are:

Beltch issued a promissory note to Francis. Francis indorsed it to Junel ->

Dennis -> Walter ->Joel ->Justine ->Angelica -> Edwin (Holder).

______33. Edwin presented the note for payment to Joel, who refused payment. Edwin
can now give notice of dishonor to the other parties liable on the note.

______34. The note was dishonored in the hands of Edwin. So, Edwin verbally notified
Angelica of such fact. Angelica, in turn, may notify Justine, Joel, Walter, Dennis, Junel
and Francis.

______35. The note was dishonored in the hands of Edwin. So, Edwin verbally notified
Joel of such fact. Joel can validly notify Justine and Angelica.

______36. The note was dishonored in the hands of Edwin. So Edwin notified Dennis of
the dishonor. Dennis also notified Francis. In this case, Junel is already relieved from
liability for lack of notice of dishonor.

______37. The note was dishonored in the hands of Edwin. So, Edwin verbally notified
Angelica of such fact. Angelica, in turn, notified Justine, Joel, Walter, Dennis, Junel and
Francis. Edwin may proceed against Dennis despite the fact that the latter was notified
through Angelica and not by him.

______38. Protest is required in foreign bill only.

______39. An acceptance for honor is made by a stranger to a bill of exchange after the
same has been protested.

______40. In payment for honor, the person intervening subrogates to the right of the
person liable for whom he is paying for honor.

______41. A bills in set refers only to one bill composed of various parts, each being
numbered and containing a reference to the other parts.

______42. A, a holder of two parts of a bills in set, indorses one part to B and the other
part to C. Considering that a bills in set is considered as one bill, A is only liable for one
bill.

______43. Spoliation is a term referring to an alteration made by a party to an

instrument.

______44. A check becomes stale when it is outstanding for less than six (6) months.

______45. Negotiable Instruments Law is Act no 2031.

NAME: ____________________________________