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Exam 22: The Essentials of Negotiability

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Question 1

Multiple Choice

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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

A) a bearer instrument.
B) an order instrument.
C) nonnegotiable.
D) void.

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B

Question 2

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Checks received as negotiable instruments act as extensions of credit.

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Question 3

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

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

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

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

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

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

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

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

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

A demand instrument is payable when payment is requested.

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

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

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

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

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

A restrictive indorsement prohibits the further negotiation of an instrument.

Rick negotiates a bearer instrument to Shane by

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