East Mississippi Community College

ECON 2123

Chapter 28-KINDS OF INSTRUMENTS, PARTIES, AND NEGOTIABILITY

TRUE/FALSE

1)Instruments are always negotiable.

2. Instruments are transferable, written, signed promises or orders to pay a specified sum of money.

3. Both drafts and promissory notes may have the quality of negotiability.

4. Instruments are negotiable when they contain the terms required by contract law.

5. The maker is the person who writes out and creates a promissory note.

6. The person on whom the order to pay a draft is made is called a drawer.

7. The drawee on a check is a bank.

8. The payee has no rights in an instrument until the drawer or the maker has delivered it to the payee.

9. Once a draft is delivered to the payee, the drawee becomes liable.

10. When a drawee has signified in writing on a draft the willingness to make a specified payment, the drawee is called the acceptor.

11. When a party who is not originally named in an instrument allows her name to be added to it for the benefit of another party in order to add strength to the collectability of the instrument, that party becomes a secondary obligor and assumes a liability role.

12. A drawee on a draft has no responsibility under the draft until it has accepted that instrument.

13. A payee is not liable on an instrument until the payee transfers the instrument to someone else.

14. When the drawee of a draft has indicated by writing or record a willingness to pay the amount specified in the draft, the drawee has accepted liability and is called the acceptor.

15. Revised UCC Article 3 refers to drawers, indorsers, and accommodation parties as “secondary obligors.”

16. Negotiability is the characteristic that distinguishes commercial paper and instruments from ordinary contracts.

17. If an instrument is negotiable, it is governed by Article 2 of the UCC.

18. Negotiation of commercial paper results in lesser rights to transferees than those rights afforded assignees of contracts under contract law.

19. If an instrument is nonnegotiable, the rights of the parties are governed by the general principles of contract law.

20. A negotiable instrument may be partly printed and partly typewritten.

21. The signature on an instrument must appear at the lower right-hand corner of the face of the instrument.

22. An authorized agent signing an instrument will not be liable on the instrument if the agent discloses on the paper either the identity of the principal or the fact that the agent has signed in a representative capacity.