Multiple Choice Questions:

[Q.1] A negotiable instrument means a _________ payable either to order or to bearer.

a) Promissory note b) Bill of exchange c) Cheque d) All of the above

Ans: d) All of the above

[Q.2] Negotiable means transferable by delivery and instrument means a written document by which a right is created in favour of some person. Thus, negotiable instrument may mean a written document transferable by delivery.

a) The above statement is correct b) The above statement is incorrect

c) Depends on the instrument d) Depends on the mode of delivery

Ans: a) The above statement is correct

[Q.3] The essential characteristics of a negotiable instrument include:

a) Payable to order or bearer

b) Easy transferability

c) Transferee can sue in his own name

d) Title of holder in due course

e) All of the above

Ans: e) All of the above

[Q.4] The presumptions in respect of negotiable instruments include:

(I) Every negotiable instrument was made, drawn, accepted, endorsed or transferred for consideration.

(II) Every negotiable instrument bearing a date was made or drawn on such date.

(III) Every bill of exchange was accepted within a reasonable time after its date and before its maturity.

(IV) Every transfer of a negotiable instrument was made before its maturity.

(V) The endorsements appearing upon a negotiable instrument were made in the order in which they appear.

(VI) A lost negotiable instrument was duly stamped.

a) All of the above

b) (I) (III) and (V) only

c) (II) (III) and (IV) only

d) None

Ans: a) All of the above

[Q.5] A holder of negotiable instrument is a holder in due course where it is proved that the holder has obtained the instrument from its lawful owner, or from any person in lawful custody thereof, by means of an offence, fraud or for unlawful consideration and in such a case the holder has to prove that he is a holder in due course.

a) The above statement is correct b) The above statement is incorrect

Ans: b) The above statement is incorrect

[Q.6] When a bill of exchange has been noted or protested for non-acceptance or for better security and any person accepts it supra protest or honour of the drawer or of any one of the endorsers, such person is called:

a) An acceptor for honour b) Payment for honour

c) Both A&B d) None

Ans: a) An acceptor for honour

[Q.7] The conditions for a valid acceptance for honour include:

a) The bill must have been noted or protested for non-acceptance or for better security.

b) The acceptance for honour must be made with the consent of the holder.

c) It must be written on the bill and it must indicate that it is an acceptance for honour of a party who is already liable on the bill.

d) It must be signed by the acceptor for honour who must not already be liable on the bill

e) All of the above

Ans: e) All of the above