Negotiable instruments – Questions and Answers

Subject Title: Introduction to Law and Governance Revision Kit

TOPIC: Negotiable instruments

QUESTION 1
December 2022 Question Four C(i)
Using THREE examples, distinguish between a “negotiable instrument” and a “negotiable document of title”. (6 marks)

QUESTION 2
December 2022 Question Five C
Explain FOUR rules governing presentation of a bill of exchange for payment. (8 marks)

QUESTION 3
August 2022 Question Four B
Outline five distinctions between a “promissory note” and a “bill of exchange”. (5 marks)

QUESTION 4
April 2022 Question Two A(i)
In relation to negotiable instruments, discuss five duties of a collecting bank. (5 marks)

QUESTION 5
April 2022 Question Seven A
With reference to negotiable instruments, explain four parties to a bill of exchange.
(8 marks)
QUESTION 6
December 2021 Question Five A
Define:
(i) A negotiable instrument. (2 marks)
(ii) A protest instrument. (2 marks)
(iii) Highlight six essential characteristics of negotiable instruments. (6 marks)

QUESTION 7
December 2021 Pilot Paper Question Five B
Tindi issued a bill of exchange to ALD Company Limited. The bill was subsequently altered by the ALD Company Limited by crossing the name of ALD Company Limited and substituting it with the name ALD CO. LTD.

Explain the liability of the acceptor to the holder after such alteration. (8 marks)

QUESTION 8
August 2021 Question Six C
Onesmus Mwamburi bought a house from Nick Investments Limited on 1 January 2021 and paid Sh.2.5 million through a banker’s cheque payable on 5 January 2021.

Onesmus Mwamburi realised that the house was not worth the price and on 2 January 2021 notified his bank, Mbasita Finance Ltd. not to honour the cheque.

Nick Investments Ltd. presented the cheque and was paid the Sh.2.5 million. Onesmus Mwamburi has approached you for legal advice.

Analyse the legal principles applicable in the above case and advise Onesmus Mwamburi. (8 marks)

QUESTION 9
May 2021 Question One C
Explain six rules relating to presentation for acceptance of bills of exchange. (6 marks)

QUESTION 10
November 2020 Question Four B
In the context of negotiable instruments:
(i) Outline three parties to a bill of exchange. (3 marks)
(ii) Identify five rules governing presentation of a bill of exchange for payment.
(5 marks)
QUESTION 11
November 2019 Question Five C
Highlight four forms that a qualified acceptance might take. (4 marks)

QUESTION 12
May 2019 Question Six A
In relation to the law governing negotiable instruments, explain three types of endorsements that might be made on a bill of exchange. (6 marks)

QUESTION 13
November 2018 Question Four A
In relation to negotiable instruments, discuss three acts that might be held to amount to negligence on the part of the collecting banker. (6 marks)

QUESTION 14
November 2017 Question Six B
Hannah Asahani has received a document in her office which she is unable to identify. The document is dated 1 October 2017, written in Nairobi and addressed to Hannah Asahani by Peris Tunda in the following words: “Ten days after sight, pay to my order Sh.20,000 for value received”.

Required:
(i) State the name of the above document. (1 mark)
(ii) Identify the three parties, in legal terms, to the above document. (3 marks)
(iii) Highlight six essentials of the above document. (6 marks)

QUESTION 15
May 2017 Question Three A
With reference to negotiable instruments:
(i) Highlight four types of endorsements that could be used on a bill of exchange.
(4 marks)
(ii) Summarise three ways through which a bill of exchange might be discharged.
(6 marks)
QUESTION 16
November 2016 Question Seven B
Explain five circumstances when the authority of a banker to pay a cheque drawn on his bank is terminated. (10 marks)

QUESTION 17
May 2016 Question Four B and C
(a) With reference to negotiable instruments, highlight the conditions that a person must satisfy in order to qualify as a holder in due course. (6 marks)
(b) Explain three duties of a bank to its customers. (6 marks)

QUESTION 18
November 2015 Question Six B and C
(a) Describe four ways through which a bill of exchange could be discharged. (8 marks)
(b) State two differences between a “Cheque” and a “Bill of exchange”. (4 marks)

QUESTION 19
Pilot paper 2015 Question Six C
Mpole drew a bill of exchange for Sh.50,000 payable to Hussein for goods supplied. Hussein endorsed the bill to Stella for money owed to Stella. Stella endorsed the bill to her friend Asha as a gift. Asha presented the bill for payment but it was dishonoured.

Advise Asha as to the person she might sue on the bill. (6 marks)

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