Question 1

Which of the following statements is not true in relation to the Electronic Funds Transfer (EFT) Code?

Accepted Answer

A)  If an institution claims a user has committed fraud the user is obliged to prove he/she is innocent.
B)  A financial institution has a contractual obligation to obey the EFT once it has adopted the code.
C)  The EFT is a voluntary code.
D)  If a secret code was used to carry out an unauthorised transaction and there is no evidence of a fraud or a breach of security requirements the account holder can be required to pay up to $150.E) A) and B)
F) A) and C)

Question 2

Which of the following statements is not true in relation to a 'holder in due course' in relation to a cheque?

Accepted Answer

A)  They take the cheque 'subject to defects in title' and may not succeed in enforcing payment if it is not paid.
B)  They must have provided valuable consideration in return for the cheque.
C)  They are entitled to payment even if the cheque is subject to 'defects in title'.
D)  They have the right to sue on and enforce the cheque if it is not paid.E) A) and C)
F) B) and C)

Question 3

A financial institution may classify a cheque as 'stale' and not pay the holder in due course if how many months has passed since it was drawn?

Accepted Answer

A)  15 months.
B)  14 months.
C)  12 months.
D)  13 months.E) All of the above
F) A) and C)

Question 4

Which of the following statements is not true in relation to order cheques?

Accepted Answer

A)  The holder must sign the cheque on the back before handing it to a third party.
B)  If a holder fails to write 'not negotiable' on the cheque it cannot be transferred to a third party.
C)  Most government cheques are order cheques.
D)  They are negotiated by 'indorsement and delivery'.E) A) and B)
F) All of the above

Question 5

In National Australia Bank v Hokit,the court ruled that:

Accepted Answer

A)  Financial institutions are likely to be liable if they fail to detect a forged signature even it has little or no chance of detecting the forgery.
B)  Cheque account holders are not liable when their signatures are forged unless they fail to advise the institution as soon as they learn about the forgeries.
C)  Cheque account holders are not liable when their signatures are forged unless they drew the cheque in way that left the cheque vulnerable to fraudulent activity.
D)  All of the above.
E)  A and B only applied.F) All of the above
G) B) and D)

Question 6

Which of the following statements is not true in relation to bearer cheques?

Accepted Answer

A)  If cheques are not order cheques they are bearer cheques.
B)  They are negotiated by delivery to a third party.
C)  They are negotiated by 'indorsement and delivery'.
D)  A cheque that states 'Pay Metropolitan Insurance Pty Ltd or bearer' must be a bearer cheque.E) C) and D)
F) All of the above

Question 7

Daniela found Jessica's handbag in the street.There was an order cheque for $500 in the bag that was payable to Jessica.The cheque was not crossed (i.e.there were no parallel lines) .Daniela forged Jessica signature and indorsed the cheque to Jim because she owed him money.Which statement best sums up Jim's legal rights,if any,in relation to the cheque?

Accepted Answer

A)  Jim does not have legal title to the cheque.Order cheques require a signature and a forged signature is not valid.
B)  Jim will have legal title to the cheque provided the cheque does not include the words 'not negotiable'.
C)  Jim will have legal title because an uncrossed order cheque is not subject to the nemo dat rule.
D)  Jim does not have legal title to the cheque.Order cheques must be transferred by endorsement and delivery and delivery has not taken place.E) A) and C)
F) A) and D) A

Question 8

The words "not negotiable" on a cheque mean:

Accepted Answer

A)  the cheque cannot be negotiated or transferred.
B)  the cheque can be transferred.
C)  the holder of the cheque has the same title to the cheque as the person from whom they obtained it.
D)  the cheque must be signed by the drawee.E) B) and D)
F) A) and C)

Question 9

Which of the following statements is not true about bills of exchange?

Accepted Answer

A)  Businesses cannot issue bills of exchange but they can buy and sell them.
B)  They are often held by several parties before being presented for payment.
C)  They are often used to raise short term finance for commercial transactions.
D)  They play an important role in providing credit for international transactions.E) A) and B)
F) A) and C)

Question 10

Which of the following statements is not accurate in relation to the words 'account payee' on a cheque?

Accepted Answer

A)  The words prevent the cheque being transferred to someone else.
B)  The words are not recognised by the Cheques Act 1968 as a valid crossing on a cheque.
C)  A collecting institution that collects a cheque for a customer who is not the specified payee may be liable to the true owner of the cheque.
D)  The words warn a collecting institution that the cheque must be paid into the account of the specified payee.E) B) and C)
F) A) and D) A

Question 11

The nemo dat rule states that:

Accepted Answer

A)  you can acquire a better title than the one that was held by the person who gave it to you.
B)  rights to title can always be transferred if the transferor is willing.
C)  you cannot acquire a better title than the one that was held by the person who passed it to you.
D)  rights to title cannot be transferred unless the transferee is willing.E) B) and C)
F) None of the above

Question 12

Which of the following does not appear as part of the definition of a cheque under s 10(1) of the Cheques Act 1986?

Accepted Answer

A)  'requiring a financial institution to pay on demand'.
B)  'a certain sum of money'.
C)  'addressed by one party to another party'.
D)  'An unconditional order in writing'.
E)  'signed by the person who gives the cheque'.F) A) and E)
G) C) and D)

Question 13

An important rule in regard to the negotiability of cheques is that:

Accepted Answer

A)  Some cheques are not subject to the nemo dat rule.They can be negotiated provided they are crossed with two parallel lines.
B)  all cheques are subject to the nemo dat rule.
C)  the nemo dat rule applies to cheques that are crossed 'not negotiable'.
D)  no cheques are subject to the nemo dat rule.E) None of the above
F) A) and D)

Question 14

Which of the following does not regulate Electronic Funds Transfers?

Accepted Answer

A)  Consumer protection laws
B)  The National Credit Code.
C)  The Code of Banking Practice.
D)  The Building Society Code of Practice.
E)  The Cheques Act 1968.F) B) and C)
G) None of the above

Question 15

If a financial institution collects a cheque for someone who is not the true owner it may commit the tort of conversion and be liable to the true owner for damages.What is the institution's main statutory defence?

Accepted Answer

A)  The customer failed to write 'not negotiable' across the cheque.
B)  The financial institution was negligent but acted in good faith.
C)  The financial institution acted in good faith and without negligence.
D)  The forged signature was so good it could only be detected by an expert.E) All of the above
F) A) and D)

Question 16

When customers of a financial institution draw (write) a cheque that institution has a duty:

Accepted Answer

A)  not to pay a cheque that contain the drawee's forged signature or a fraudulent alteration.
B)  to obey the customer's instructions,including crossings and other directions.
C)  to honour (pay) the cheque if there are sufficient funds.
D)  to comply with all of the above.
E)  to comply with A and B only.F) B) and E)
G) C) and E)

Question 17

In Commonwealth Trading Bank of Australia v Sydney Wide Stores,the High Court held that:

Accepted Answer

A)  financial institutions do not have a duty to contact the drawer of a cheque to confirm if the amount payable is correct.
B)  customers do not have a duty to draw cheques carefully.
C)  financial institutions have a duty to pay a cheque that has been materially altered.
D)  customers have a duty to draw cheques carefully to avoid material alterations.E) A) and B)
F) None of the above

Question 18

Cheque account holders owe common law duties to their financial institutions.Which of the following statement(s) is/are true regarding these duties?

Accepted Answer

A)  They must draw cheques carefully so they are not easily altered or forged and advise the bank of any known forgeries.
B)  They must check periodic bank statements and notify the bank of any unauthorised debts.
C)  They must take all reasonable steps to prevent forged cheques being presented for payment e.g.,by not leaving a cheque book where it could easily be stolen.
D)  They must strike out the words 'or bearer' on a cheque and cross the cheque 'not negotiable'.
E)  They owe all of the above dutiesF) A) and E)
G) A) and B)

Question 19

Inserting two transverse parallel lines across a cheque instructs a financial institution that:

Accepted Answer

A)  it is now subject to the nemo dat rule.
B)  it can no longer be indorsed.If the cheque is not endorsed it will be void.
C)  it can be cashed and should not be placed into an account with a financial institution.
D)  it must be paid into an account with a financial institution.E) A) and B)
F) A) and C)

Question 20

What is the name of a bill of exchange that is issued by a trading bank and guarantees payment of a specified amount to the holder at a guaranteed time?

Accepted Answer

A)  A trade bill.
B)  A finance bill.
C)  A bank bill.
D)  An IOU bill.E) A) and B)
F) A) and C) C

Exam 20: Negotiable Instruments and Electronic Funds Transfers

Which of the following statements is not true in relation to the Electronic Funds Transfer (EFT) Code?

Correct Answer
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Which of the following statements is not true in relation to a 'holder in due course' in relation to a cheque?

Correct Answer
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A financial institution may classify a cheque as 'stale' and not pay the holder in due course if how many months has passed since it was drawn?

Correct Answer
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Which of the following statements is not true in relation to order cheques?

Correct Answer
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In National Australia Bank v Hokit,the court ruled that:

Correct Answer
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Which of the following statements is not true in relation to bearer cheques?

Correct Answer
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Correct Answer
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A

The words "not negotiable" on a cheque mean:

Correct Answer
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Which of the following statements is not true about bills of exchange?

Correct Answer
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Which of the following statements is not accurate in relation to the words 'account payee' on a cheque?

Correct Answer
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A

The nemo dat rule states that:

Correct Answer
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Which of the following does not appear as part of the definition of a cheque under s 10(1) of the Cheques Act 1986?

Correct Answer
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An important rule in regard to the negotiability of cheques is that:

Correct Answer
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Which of the following does not regulate Electronic Funds Transfers?

Correct Answer
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If a financial institution collects a cheque for someone who is not the true owner it may commit the tort of conversion and be liable to the true owner for damages.What is the institution's main statutory defence?

Correct Answer
verified

When customers of a financial institution draw (write) a cheque that institution has a duty:

Correct Answer
verified

In Commonwealth Trading Bank of Australia v Sydney Wide Stores,the High Court held that:

Correct Answer
verified

Cheque account holders owe common law duties to their financial institutions.Which of the following statement(s) is/are true regarding these duties?

Correct Answer
verified

Inserting two transverse parallel lines across a cheque instructs a financial institution that:

Correct Answer
verified

What is the name of a bill of exchange that is issued by a trading bank and guarantees payment of a specified amount to the holder at a guaranteed time?

Correct Answer
verified
C

Exam 20: Negotiable Instruments and Electronic Funds Transfers

Which of the following statements is not true in relation to the Electronic Funds Transfer (EFT) Code?

Correct AnswerverifiedShow Answer

Which of the following statements is not true in relation to a 'holder in due course' in relation to a cheque?

Correct AnswerverifiedShow Answer

A financial institution may classify a cheque as 'stale' and not pay the holder in due course if how many months has passed since it was drawn?

Correct AnswerverifiedShow Answer

Which of the following statements is not true in relation to order cheques?

Correct AnswerverifiedShow Answer

In National Australia Bank v Hokit,the court ruled that:

Correct AnswerverifiedShow Answer

Which of the following statements is not true in relation to bearer cheques?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

The words "not negotiable" on a cheque mean:

Correct AnswerverifiedShow Answer

Which of the following statements is not true about bills of exchange?

Correct AnswerverifiedShow Answer

Which of the following statements is not accurate in relation to the words 'account payee' on a cheque?

Correct AnswerverifiedA

The nemo dat rule states that:

Correct AnswerverifiedShow Answer

Which of the following does not appear as part of the definition of a cheque under s 10(1) of the Cheques Act 1986?

Correct AnswerverifiedShow Answer

An important rule in regard to the negotiability of cheques is that:

Correct AnswerverifiedShow Answer

Which of the following does not regulate Electronic Funds Transfers?

Correct AnswerverifiedShow Answer

If a financial institution collects a cheque for someone who is not the true owner it may commit the tort of conversion and be liable to the true owner for damages.What is the institution's main statutory defence?

Correct AnswerverifiedShow Answer

When customers of a financial institution draw (write) a cheque that institution has a duty:

Correct AnswerverifiedShow Answer

In Commonwealth Trading Bank of Australia v Sydney Wide Stores,the High Court held that:

Correct AnswerverifiedShow Answer

Cheque account holders owe common law duties to their financial institutions.Which of the following statement(s) is/are true regarding these duties?

Correct AnswerverifiedShow Answer

Inserting two transverse parallel lines across a cheque instructs a financial institution that:

Correct AnswerverifiedShow Answer

What is the name of a bill of exchange that is issued by a trading bank and guarantees payment of a specified amount to the holder at a guaranteed time?

Correct AnswerverifiedC

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A

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A

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C