NEGOTIABLE INSTRUMENTS MCQs

1. Person named in the instrument to whom money is directed to be paid is known as _______________.

a) Drawer

b) Acceptor

c) Maker

d) Payee

Ans D

2. Maker of a bill of exchange is called as ____________

a) Drawer

b) Drawee

c) Acceptor

d) Payee

Ans A

3. Days of grace provided to the Instruments at maturity is _______________

a) 1 day

b) 2 days

c) 3 days

d) 5 days

Ans C

4. Parties to a negotiable instrument can be discharged from liability by ______________

a) Cancellation

b) Payment

c) Release

d) All of the above

Ans D

5. Validity period for the presentment of cheque in bank is _______________

a) 3 months

b) 6 months

c) 1 year

d) 2 years

Ans A

6. Offences committed under the Negotiable Instruments Act can be _______________

a) Compoundable

b) Non-compoundable

c) Non-compoundable and non-bailable

d) Bailable

Ans A

7. A negotiable instrument that is payable to order can be transferred by:

a) Simple delivery

b) endorsement and delivery

c) endorsement

d) registered post

Ans B

8. A negotiable instrument drawn in favour of minor is

a) Void

b) Void but enforceable

c) Valid

d) None of these

Ans C

9. Which of the following is not applicable to negotiable instruments?

a) It must be in writing

b) It must be transferable

c) It must be registered

d) It must be signed

Ans C

10. ‘A’ signs the instrument in the following manner. State the instrument which cannot be considered as promissory note.

a) I promise to pay B or order INR 500.

b) I acknowledge myself to be indebted to B for INR 1,000 to be paid on demand for value received.

c) I promise to pay B INR 10,000 after three months.

d) I promise to pay B INR 500 seven days after my marriage with C.

Ans D

11. A promissory note drawn jointly by X, a minor and Y, a major is:

a) Void

b) Valid but not negotiable

c) Valid but can be enforced only against Y

d) None of the above

Ans C

12. In legal terms, person who takes the instruments bonafide for value before it is overdue, in good faith, is known

as:

a) Holder in due course

b) Holder

c) Holder for value

d) None of the above

Ans A

13. P obtains a cheque drawn by M by way of gift. Here P is a:

a) Holder in due course

b) Holder for value

c) Holder

d) None of the above

Ans C

14. As per the Negotiable Instruments Act, 1881, when the day on which a promissory note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on the …….……..

a) said public holiday

b) 5 days succeeding public holiday

c) next succeeding business day

d) next preceding business day

Ans D

15. Person named in the instrument to whom money is directed to be paid:

a) Drawer

b) Acceptor

c) Maker

d) Payee

Ans D

16. A draws a cheque in favour of M, a minor. M endorses the same in favour of X. The cheque is dishonoured by the bank on grounds of inadequate funds. As per the provisions of Negotiable Instruments Act, 1881:

a) M is liable to X

b) X can proceed against A

c) No one is liable in this case

d) M can proceed against A

Ans B

17. While drawing a bill of exchange, a person whose name is given in addition to the drawee who can be resorted in case of need, is called _____________________.

a. Acceptor

b. Acceptor for honour

c. Drawee in case of need

d. Drawer

Ans C

18. A draws a bill on B. B accepts the bill without any consideration. The bill is transferred to C without consideration. C transferred it to D for value. Decide as per provisions of Negotiable Instruments Act, 1881-

a. D can sue only A

b. D can sue A or B only

c. D can sue any of the parties A, B or C

d. D cannot sue any of the parties A, B or C

Ans C

19. The date of maturity of a bill payable hundred days after sight and which is presented for sight on 4th May, 2017, is (as per the provisions of the Negotiable Instruments Act, 1881):

a. 13 August, 2017

b. 14 August, 2017

c. 15 August, 2017

d. 16 August, 2017

Ans B

20. A draws a bill on B for INR 500 payable to the order of A. B accepts the bill, but subsequently dishonour it by non – payment. A sues B on the bill but B proves that it was accepted for value as to INR 400, and as an accommodation to the plaintiff as to the residue. Thus, as per the provisions of the Negotiable Instruments Act, 1881, A can only recover the following amount:

a. 900

b. 500

c. 400

d. 100

Ans C

21. An instrument containing a promise to __________ is valid promissory note.

a. Pay Rs. 10 lakhs

b. Deliver certain goods

c. Pay Rs. 10 lakh and deliver certain goods

d. Both (a) and (c)

Ans A

22. In case on an accepted bill, the liability of drawer is __________

a. Primary and unconditional

b. Primary and conditional

c. Secondary and conditional

d. Secondary and unconditional

Ans C

23. Until the bill is accepted, the liability of drawer is __________.

a. Primary and unconditional

b. Primary and conditional

c. Secondary and conditional

d. Secondary and unconditional

Ans B

24. Until the bill is accepted, the liability of drawee is __________.

a. Primary and unconditional

b. Primary and conditional

c. Secondary and conditional

d. None of these

Ans D

25. In case of an accepted bill, the liability of drawee is __________

a. Primary and unconditional

b. Primary and conditional

c. Secondary and conditional

d. None of these

Ans A