Multiple-Choice Questions
1. In order to negotiate bearer paper, one must:
(a) Indorse the paper
(b) Indorse and deliver the paper with consideration
(c) Deliver the paper
(d) Deliver and indorse the paper
2. The possessor of a piece of order paper does not have an unconditional right to be paid if:
(a) The paper is negotiable.
(b) The possessor is the payee.
(c) The paper has been indorsed to the possessor.
(d) The possessor is a holder in due course.
(e) The issuer changed his mind after signing the instrument.
3. An instrument is negotiable unless:
(a) It is in writing.
(b) It is signed only by the drawee.
(c) It contains an order to pay.
(d) It is payable on demand.
(e) It is payable only to bearer.
4. Chloe buys a motorcycle on eBay from Junior. In payment she gives him a promissory note for $7,000. He immediately negotiates the note to Terry. After the motorcycle arrives, Chloe discovers that it is not as advertised. One week later, she notifies Junior. She still has to pay Terry because:
(a) On eBay, the rule is "buyer beware."
(b) Terry's rights are not affected by Junior's misdeeds.
(c) Terry indorsed the note.
(d) Chloe is the drawee.
(e) Chloe waited too long to complain.
5. Donna gives a promissory note to C. J. Which of the following errors would make the note invalid?
(a) The instrument was written on a dirty sock.
(b) The instrument promised to pay 15,000 euros.
(c) The note stated that Donna owed C. J. "$1,500: One thousand and five dollars."
(d) Donna signed the note without reading it.
(e) The due date was specified as "three months after Donna graduates from college."