Cheque Negotiability and Endorsement
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Questions and Answers

What is the significance of the signature of the drawer on a cheque?

  • It enables the bank to verify the account holder's identity
  • It confirms the drawer's liability for the payment (correct)
  • It serves as a witness to the transaction
  • It indicates the account holder's consent to dishonour the cheque

    • How is a cheque typically transferred?

  • By issuing a new cheque in favour of the endorsee
  • By endorsement and delivery of the instrument to the endorsee (correct)
  • By assignment of the instrument to the endorsee
  • By novation of the original agreement

    • What is a characteristic of a cheque as a commercial paper?

  • It is non-negotiable
  • It is negotiable (correct)
  • It is only transferable by novation
  • It is a type of promissory note

    • What is the significance of endorsement on a cheque?

    <p>It confirms the transfer of ownership to the endorsee</p> Signup and view all the answers

    What is a key aspect of a cheque's formalities?

    <p>The drawer's signature and date</p> Signup and view all the answers

    What is the characteristic of a cheque that is made payable 'to bearer'?

    <p>It can be transferred by delivery</p> Signup and view all the answers

    What is the implication of marking a cheque as 'Not Negotiable'?

    <p>It makes the cheque non-transferable</p> Signup and view all the answers

    What is the primary difference between a cheque made payable 'to bearer' and one marked 'Not Negotiable'?

    <p>One is transferable while the other is not</p> Signup and view all the answers

    What is the consequence of making a cheque 'Not Negotiable'?

    <p>The cheque becomes non-transferable</p> Signup and view all the answers

    What is the characteristic of a cheque that is marked 'Not Negotiable'?

    <p>It cannot be transferred</p> Signup and view all the answers

    What is the minimum requirement for a cheque to be considered valid?

    <p>It must contain the term 'Cheque' in the body of the instrument.</p> Signup and view all the answers

    Which of the following is a formal requirement for a cheque?

    <p>The term 'Cheque' in the body of the instrument</p> Signup and view all the answers

    What is the primary purpose of including the term 'Cheque' in a cheque?

    <p>To identify the instrument as a cheque</p> Signup and view all the answers

    Which of the following is NOT a formal requirement for a cheque?

    <p>The payee's name</p> Signup and view all the answers

    What is the consequence of a cheque not meeting the formal requirements?

    <p>The cheque is invalid and cannot be negotiated</p> Signup and view all the answers

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