Chapter 24 Self-test questions

. Which of the following statements are correct? Please select all that apply.

Instruments embody a payment obligation.

Cheques and promissory notes are examples of instruments.

A transfer of an instrument effects an assignment of the underlying payment obligation.

Autonomy of payment means that as against an honest purchaser of an instrument the obligee under an instrument can raise no defences.

. Which of the following statements is correct?

Bills of exchange require an unconditional order from a person called a drawer to another person called a drawee.

Bills of exchange must be negotiable.

Bills of exchange must be in writing and signed by the acceptor.

Bills of exchange must be payable at a fixed or determinable date in the future and be dated.

. Which of the following statements is incorrect?

A bill of exchange must be endorsed to be negotiable.

A bill made payable to a fictitious person is treated as a bearer bill.

Whether a person is fictitious or not seems to depend on the intention of the drawer of the bill.

An order bill is transferred by indorsement and delivery.

. A holder in ___ ___ is the most secure status for any holder of a bill of exchange.

. Which of the following statements are correct? Please select all that apply.

The drawee of a bill of exchange is liable on it.

The following people can be liable on a bill of exchange [8211;] any acceptors, the drawer and any indorsers.

If the acceptor dishonours the bill then the holder can claim against the drawer or any endorsers.

If an endorser has to pay the holder of a bill they will have a claim against all previous endorsers, the drawer and the acceptor.

. Which of the following statements are incorrect? Please select all that apply.

A mere holder claiming on a bill of exchange is subject to any defence available arising from the underlying transaction to which the bill relates, for example, that the bill was procured through fraud or duress or the underlying contract failed for lack of consideration.

A holder in due course is not subject to personal defences in a claim on a bill of exchange.

Where a bill of exchange was procured by duress, fraud or misrepresentation, a holder for value and a holder in due course can always be met by a defence on such grounds.

A holder in due course is subject to a defence founded on the fact that a previous signature on the bill was forged.

. Where a buyer uses a letter of credit as a means of payment, the bank acting for him is known as the ___ bank.

. Which of the following statements are correct? Please select all that apply.

Where a letter of credit provides for an 'acceptance credit', issuing bank undertakes that it will accept a bill of exchange in return for conforming documentation.

In a letter of credit, confirming bank owes a duty to the beneficiary to make payment in accordance with its terms

In a letter of credit there is no contractual relationship between issuing bank and the beneficiary.

Where payment is to be by a letter of credit, in a contract for the sale of goods, it is normally a condition precedent to the seller's obligation to ship goods that the letter of credit has been opened.

. The doctrine of ___ ___ means that the seller must tender documents which appear to be precisely in accordance with the specifications in the credit.

. Which of the following statements is clearly a correct statement of English law? Please select all that apply.

A binding agreement not to make a claim under a letter of credit is a defence were such a claim to be made.

A court will restrain a beneficiary from claiming under a letter of credit where the claim is unconscionable.

A court will restrain a holder from making a claim under a letter of credit where some of the documents tendered contain misrepresentations.

Although there are good reasons why such a position is illogical, it appears that an innocent holder of a letter of credit is entitled to be paid even though one or more of the documents tendered are forgeries.

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