Question

1. Brownies Inc. signs an instrument that promises to pay Chocolate Company a certain price, with interest, for a shipment of refined cocoa. By the terms of the instrument, it must be paid on its presentment, but no time for payment is specified. This instrument is

a. negotiable.

b. nonnegotiable, because it is only payable on presentment.

c. nonnegotiable, because it is only payable on demand.

d. nonnegotiable, because no time for payment is specified.

2. Rehab LLC owes $20,000 to Stonemason Inc. Rehab executes a note to Stonemason as security for the debt. This security

a. does not constitute sufficient consideration for HDC status.

b. satisfies the consideration requirement for HDC status.

c. does not satisfy the value requirement for HDC status.

d. satisfies the value requirement for HDC status.

3. An instrument payable to two or more persons without an “and” or an “or” between the parties’ names, such as a check “payable to the order of Gerhard Hans,”

a. requires the indorsement of both of the parties to be negotiated.

b. must be converted to a bearer instrument to be negotiated.

c. requires the indorsement of only of the parties to be negotiated.

d. is nonnegotiable.

Answer 1

1. d. Nonnegotiable, because no time for payment is specified.

Reason -

Prompt payment: A negotiable instrument facilitates the holder to anticipate prompt payment because dishonour refers to the ruin of credit of all persons who are parties to the instrument.

2. c.does not satisfy the value requirement for HDC status.

Reason -

Taken for Value - A negotiable instrument should be of a particlar value as a part of consideration. Otherwise it should not be a proper consideration against which it was exchanged.

3. d. is nonnegotiable.