Question 1

Which of the following is true regarding how an accommodation party may sign an instrument?

Accepted Answer

A)   As a maker.
B)   As a drawer.
C)   As an acceptor.
D)   As an endorser.
E)   All of these.F) A) and B)
G) B) and D)

Question 2

If a transfer is through endorsement, transfer warranties apply to any future holder; however, if the transfer does not occur through endorsement, the warranties apply only to the transferee.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is false regarding the elements a party must meet in order to be considered a holder in due course?

Accepted Answer

A)   The party must be a holder of a complete and authentic negotiable instrument.
B)   The holder must take the instrument for value.
C)   The holder must take the instrument in good faith.
D)   The holder must take the instrument without notice of defects.
E)   The holder must either pay for the instrument or receive it as a gift.F) C) and D)
G) None of the above

Question 4

If Alice makes a proper tender of the full payment of $1,000 due on Richard's note on the note's due date, but Richard improperly refuses to accept the money, Alice will still be liable for the $1,000, but will not have to pay any interest on the amount.

Accepted Answer

A) True 
 B)False

Question 5

Reference - Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed down the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. Which of the following is the drawee of the check Doreen presented to Hot Dresses, Inc.?

Accepted Answer

A)   Doreen.
B)   Hot Dresses, Inc.
C)   Betty, because she owned Hot Dresses, Inc.
D)   Doreen's bank.
E)   Betty's bank.F) C) and D)
G) A) and B)

Question 6

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Accepted Answer

A) True 
 B)False

Question 7

Reference - Angry employee. Martin is in charge of payroll and other expenses for ABC, Inc. He becomes very angry with his boss Adam because Adam started dating Martin's girlfriend Stacy. Martin decided to quit but not before he got some extra money from ABC, Inc. Martin wrote five checks from the account of ABC, Inc. to pay off the five credit card companies that Martin owed money. The credit card companies took the checks without reason to be suspicious as to the source of payment. The checks to the credit card companies in total amounted to $30,000, and each check was in an amount under $10,000. Martin also made out ten checks on the account of ABC to twenty alleged employees who did not really exist. Each of these checks was in the amount of $5,000. Martin took the checks, endorsed and cashed the checks in the names of the various fake employees, and kept the cash. Finally, Martin discovers through office gossip that Adam has been looking for another job with XYZ, Inc. located in a neighboring state and that Adam is supposed to go there for an in person interview in a few weeks. Martin sets up an interview with XYZ, Inc. pretends to be Adam, and induces XYZ, Inc. to give him, posing as Adam, a check for $5,000 as a signing bonus. Martin immediately endorses the check pretending to be Adam and pockets the cash. Finally, Martin leaves town heading for the Caribbean. Is ABC, Inc. entitled to a refund from its bank for the checks the bank paid written to fake employees?

Accepted Answer

A)   Yes, because Martin forged the names of the employees.
B)   Yes, because Martin posed as an imposter in regard to the employees.
C)   Yes, because the bank has a cause of action against Martin and can likely get a default judgment.
D)   No, because of the imposter rule.
E)   No, because of the fictitious-payee rule.F) All of the above
G) A) and C)

Question 8

Which of the following is false regarding the ways by which a holder may take an instrument for value?

Accepted Answer

A)   The holder performs the promise for which the instrument was issued or has started performance.
B)   The holder acquires a security interest or other lien in the instrument.
C)   The holder takes the instrument for payment of a preceding claim.
D)   The holder exchanges the instrument for another negotiable instrument.
E)   The holder exchanges the instrument for an irrevocable obligation to a third party.F) All of the above
G) None of the above

Question 9

Which of the following is true regarding liability on negotiable instruments?

Accepted Answer

A)   Makers and acceptors are primarily liable for a negotiable instrument, while drawers and endorsers are secondarily liable.
B)   Drawers and endorsers are primarily liable, while makers and acceptors are secondarily liable.
C)   Makers and drawers are primarily liable, while acceptors and endorsers are secondarily liable.
D)   Acceptors and endorsers are primarily liable, while makers and drawers are secondarily liable.
E)   Makers, acceptors, drawers, and endorsers are all secondarily liable.F) C) and D)
G) B) and E)

Question 10

Which of the following must occur for a drawer to become liable on an instrument?

Accepted Answer

A)   The holder of the instrument must present the instrument in a proper and timely fashion.
B)   The instrument must be dishonored.
C)   Notice of the dishonor must be given to the drawer.
D)   The holder of the instrument must present the instrument in a proper and timely fashion, the instrument must be dishonored, and notice of the dishonor must be given to the drawer.
E)   The holder of the instrument must present the instrument in a proper and timely fashion and the instrument must be dishonored, but there is no requirement of notice of dishonor since the injured party may proceed directly to court.F) None of the above
G) B) and D)

Question 11

Which of the following will be considered a personal defense to payment of an instrument?

Accepted Answer

A)   Breach of contract or warranty.
B)   Fraud in the inducement.
C)   Illegality.
D)   Breach of contract or warranty, fraud in the inducement, and illegality.
E)   Illegality and lack or failure of consideration, but not breach of contract or warranty.F) B) and E)
G) A) and B)

Question 12

Which of the following is the most likely result if an agent admits to the principal that a check for the principal was forged and placed into the agent's bank account, but the principal does nothing until two months later after the agent leaves town with the funds?

Accepted Answer

A)   Because the checks were forged, the principal can receive reimbursement of the funds from any maker involved or any bank that cashed the checks.
B)   The principal can receive reimbursement from makers of the checks only.
C)   The principal can receive reimbursement from any bank that cashed the checks only.
D)   It is likely that it will be determined that the principal ratified the signatures and that the principal cannot recover from either makers or banks that cashed the checks.
E)   The principal can recover from either the makers or any banks who cashed the checks only if it can be shown that the agent cannot be located for criminal prosecution.F) None of the above
G) A) and B)

Question 13

Which of the following does the UCC define as, "honesty in fact and the observance of reasonable commercial standards for fair dealing?"

Accepted Answer

A)   Commercial standards
B)   Subjective reasonableness.
C)   Objective reasonableness.
D)   Good faith.
E)   Reasonable investigation.F) C) and D)
G) A) and E)

Question 14

Which of the following is a type of warranty regarding instruments?

Accepted Answer

A)   Transfer.
B)   Presentment.
C)   Acknowledgement.
D)   Transfer, presentment, and acknowledgement.
E)   Transfer and presentment, but not acknowledgement.F) A) and D)
G) A) and C)

Question 15

Which of the following is a type of digital signature?

Accepted Answer

A)   Biometric.
B)   Key-based.
C)   Identifiable.
D)   Biometric, key-based, and identifiable.
E)   Biometric and key-based, but not identifiable.F) A) and B)
G) D) and E)

Question 16

Set forth the five items that a party warrants when the party transfers an instrument for consideration.

Accepted Answer

When a party transfers an instrument for...

Question 17

Reference - Check Cashing Business. Susan owns and operates a check cashing business. A customer, Bob, claiming to be Sam, comes in and cashes a $2,000 check issued by ABC Trucking to Sam. The day after Susan cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the customer had forged Sam's name on the check issued by ABC Trucking. At the time she took the ABC Trucking check, Susan was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Susan decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took the ABC Trucking check, she took a check from another customer, Maurice. It was later discovered that the check from Maurice, which was four months old, was the subject of a dispute between Maurice and the issuer of the check for whom Maurice had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Maurice stopped payment on the checks. Susan claims that she was entitled to the status of holder in due course and was entitled to payment on both checks. What is the effect of the alteration of the check on Susan's status as a holder in due course?

Accepted Answer

A)   The alteration has no effect because a holder is not charged with examining an instrument presented for payment.
B)   The alteration will likely prohibit her from being a holder in due course.
C)   The alteration will affect her status as a holder in due course only if she had been put on notice of prior criminal behavior in the past on the part of Bob.
D)   The alteration will affect her status as a holder in due course only if the issuer can establish that it was not negligent in allowing a thief to gain access resulting in the alteration.
E)   The alteration will affect her status as a holder in due course because it involved over $500; otherwise, based on the purpose of the law to protect holders, the alteration would have had no effect.F) B) and E)
G) A) and D)

Question 18

Under the UCC, when does a person have notice of a fact?

Accepted Answer

A)   When the person has actual notice of the fact.
B)   When the facts and circumstances known to the person at the time in question give the person reason to know that the facts exist.
C)   When the person receives notice or notification of the facts.
D)   When the person has actual notice of the fact, when the facts and circumstances known to the person at the time in question give the person reason to know that the facts exist, and also when the person receives notice or notification of the facts.
E)   When the person has actual knowledge of the fact, or the facts and circumstances known to the person at the time in question give the person reason to know that the fact exists, but not that the person receives notice or notification of the fact.F) B) and D)
G) A) and B)

Question 19

Which of the following results in liability of the principal because the principal approved of an unauthorized agent's signature?

Accepted Answer

A)   Ratification.
B)   Authorization.
C)   Acknowledgement.
D)   Pre-approval.
E)   Post-approval.F) All of the above
G) A) and E)

Question 20

In what year did the Electronic Signatures in Global and National Commerce Act become federal law?

Accepted Answer

A)   1990
B)   1994
C)   1998
D)   2000
E)   None of theseF) All of the above
G) A) and C)

Exam 17: Negotiable Instruments: Negotiability and Transferability

If a transfer is through endorsement, transfer warranties apply to any future holder; however, if the transfer does not occur through endorsement, the warranties apply only to the transferee.

Correct Answer
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Correct Answer
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Which of the following is true regarding how an accommodation party may sign an instrument?

Correct Answer
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Under the UCC, when does a person have notice of a fact?

Correct Answer
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Which of the following is false regarding the ways by which a holder may take an instrument for value?

Correct Answer
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Which of the following is a type of digital signature?

Correct Answer
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Correct Answer
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A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Correct Answer
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Set forth the five items that a party warrants when the party transfers an instrument for consideration.

Correct Answer
verified
When a party transfers an instrument for...
View Answer

Which of the following is the most likely result if an agent admits to the principal that a check for the principal was forged and placed into the agent's bank account, but the principal does nothing until two months later after the agent leaves town with the funds?

Correct Answer
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Which of the following is a type of warranty regarding instruments?

Correct Answer
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Which of the following must occur for a drawer to become liable on an instrument?

Correct Answer
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Correct Answer
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Which of the following is false regarding the elements a party must meet in order to be considered a holder in due course?

Correct Answer
verified

Which of the following results in liability of the principal because the principal approved of an unauthorized agent's signature?

Correct Answer
verified

In what year did the Electronic Signatures in Global and National Commerce Act become federal law?

Correct Answer
verified

Which of the following does the UCC define as, "honesty in fact and the observance of reasonable commercial standards for fair dealing?"

Correct Answer
verified

Which of the following will be considered a personal defense to payment of an instrument?

Correct Answer
verified

Which of the following is true regarding liability on negotiable instruments?

Correct Answer
verified

If Alice makes a proper tender of the full payment of $1,000 due on Richard's note on the note's due date, but Richard improperly refuses to accept the money, Alice will still be liable for the $1,000, but will not have to pay any interest on the amount.

Correct Answer
verified

Exam 17: Negotiable Instruments: Negotiability and Transferability

If a transfer is through endorsement, transfer warranties apply to any future holder; however, if the transfer does not occur through endorsement, the warranties apply only to the transferee.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding how an accommodation party may sign an instrument?

Correct AnswerverifiedShow Answer

Under the UCC, when does a person have notice of a fact?

Correct AnswerverifiedShow Answer

Which of the following is false regarding the ways by which a holder may take an instrument for value?

Correct AnswerverifiedShow Answer

Which of the following is a type of digital signature?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Correct AnswerverifiedShow Answer

Set forth the five items that a party warrants when the party transfers an instrument for consideration.

Correct AnswerverifiedWhen a party transfers an instrument for...View AnswerShow Answer

Which of the following is the most likely result if an agent admits to the principal that a check for the principal was forged and placed into the agent's bank account, but the principal does nothing until two months later after the agent leaves town with the funds?

Correct AnswerverifiedShow Answer

Which of the following is a type of warranty regarding instruments?

Correct AnswerverifiedShow Answer

Which of the following must occur for a drawer to become liable on an instrument?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is false regarding the elements a party must meet in order to be considered a holder in due course?

Correct AnswerverifiedShow Answer

Which of the following results in liability of the principal because the principal approved of an unauthorized agent's signature?

Correct AnswerverifiedShow Answer

In what year did the Electronic Signatures in Global and National Commerce Act become federal law?

Correct AnswerverifiedShow Answer

Which of the following does the UCC define as, "honesty in fact and the observance of reasonable commercial standards for fair dealing?"

Correct AnswerverifiedShow Answer

Which of the following will be considered a personal defense to payment of an instrument?

Correct AnswerverifiedShow Answer

Which of the following is true regarding liability on negotiable instruments?

Correct AnswerverifiedShow Answer

If Alice makes a proper tender of the full payment of $1,000 due on Richard's note on the note's due date, but Richard improperly refuses to accept the money, Alice will still be liable for the $1,000, but will not have to pay any interest on the amount.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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When a party transfers an instrument for...
View Answer

Correct Answer
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