Question 1

Machine Shop Inc. issues a payroll check drawn on Nation Bank "payable to the order of O'Dell." O'Dell takes the check to the bank and delivers it to the teller without signing it. This is

Accepted Answer

A)  an assignment.
B)  a negotiation.
C)  a bank transfer.
D)  a trade acceptance.E) A) and B)
F) A) and C)

Question 2

An instrument that requires an indorsement for negotiation must contain a handwritten signature.

Accepted Answer

A) True 
 B)False

Question 3

Usually, an indorsement is unqualified, which means that the indorser is guaranteeing payment on an instrument, in addition to transferring title to it.

Accepted Answer

A) True 
 B)False

Question 4

Rochelle fraudulently induces Sybil to sign a note. Rochelle sells the note to Terry, who does not know of the fraud and takes the note for value and in good faith, and thus becomes an HDC. Terry sells the note to Ulrich, who sells the note back to Rochelle. Does Rochelle acquire Terry's HDC rights in the note?

Accepted Answer

No, Rochelle does not acquire Terry's HD...

Question 5

Raul wants to transfer a check to Schmidt. The check is defective if it

Accepted Answer

A)  is clearly stamped "insufficient funds."
B)  contains handwritten terms.
C)  is undated.
D)  is payable to alternative or join payees.E) A) and C)
F) None of the above

Question 6

Neither an ordinary holder nor an HDC can enforce an instrument that was originally incomplete and later completed in an unauthorized manner.

Accepted Answer

A) True 
 B)False  False

Question 7

Kris transfers a note, on which Lin is the maker, to Mari, who takes it for value and in good faith. Mari knows that Kris breached the contract underlying the note, giving Lin a defense against payment. With respect to this note, Mari is

Accepted Answer

A)  a knowledgeable holder in due course.
B)  an ordinary holder.
C)  an ordinary holder in due course.
D)  a knowledgeable acceptor.E) A) and B)
F) B) and C)

Question 8

On the back of a check payable to Lo, she writes "Pay to Mei, without recourse" and signs it. This

Accepted Answer

A)  does not effect the check's negotiability or any party's liability.
B)  relieves Lo of liability on the check.
C)  relieves Mei of liability on the check.
D)  renders the check nonnegotiable.E) All of the above
F) None of the above

Question 9

Generally, an indorser, merely by indorsing, impliedly promises to the pay the holder, or any subsequent endorser the amount of the instrument if the drawer or maker defaults.

Accepted Answer

A) True 
 B)False

Question 10

An insurance agent who receives a check payable to the agent when the item was actually intended as payment to the insurance company is required to make good on the check if it is later dishonored.

Accepted Answer

A) True 
 B)False

Question 11

Muni Investment Company signs a check payable to Notes & Loans Inc. to buy a promissory note executed by Omni Corporation. This check

Accepted Answer

A)  does not constitute sufficient consideration for HDC status.
B)  does not satisfy the value requirement for HDC status.
C)  satisfies the consideration requirement for HDC status.
D)  satisfies the value requirement for HDC status.E) A) and B)
F) A) and C)

Question 12

To make Credit Bank a collecting agent on a check "payable to the order of Duane," Duane should

Accepted Answer

A)  indorse the check "for deposit only."
B)  refrain from signing the check before delivering it to Credit Bank.
C)  write, above his signature, "Pay to Credit Bank."
D)  indorse the check "without recourse."E) B) and D)
F) A) and B) A

Question 13

Rafe signs a check payable to Shop Mart, which transfers the note by negotiation to Trans-State Bank. With respect to any defenses to payment on the note that Rafe could have raised against Shop Mart, most likely Rafe can

Accepted Answer

A)  raise those defenses against the bank.
B)  no longer present any defense to payment.
C)  not assert those defenses against the bank.
D)  claim more defenses against the bank than Shop Mart.E) None of the above
F) A) and D)

Question 14

Keyes negotiates a bearer instrument to Liu by delivery

Accepted Answer

A)  with an assignment of its rights under a contract.
B)  with any necessary indorsement.
C)  without more.
D)  with formal presentment in response to a demand by Liu.E) All of the above
F) A) and B)

Question 15

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

Accepted Answer

A)  an HDC, because he promised to perform services at a future date.
B)  an HDC, because the transferor was the original payee on the note.
C)  not an HDC, because he did not acquire the instrument in good faith.
D)  not an HDC, because he did not yet give value for the instrument.E) A) and B)
F) A) and C) D

Question 16

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she

Accepted Answer

A)  acquires possession of the negotiable instrument.
B)  agrees with Ellen to buy the negotiable instrument.
C)  pays the face value due on the instrument.
D)  transfers the instrument to another party.E) All of the above
F) A) and B)

Question 17

Farmers Field LLC negotiates a bearer instrument to Grain Co-op by delivery

Accepted Answer

A)  with an assignment of its rights under a contract.
B)  with any necessary indorsement.
C)  without more.
D)  with formal presentment in response to a demand by the payee.E) None of the above
F) B) and C)

Question 18

The assignee of a negotiable instrument receives only those rights that the assignor had before the assignment.

Accepted Answer

A) True 
 B)False

Question 19

The holder of a note who needs the funds owed on it can transfer it for cash to a third party, whom the maker must pay when the note comes due.

Accepted Answer

A) True 
 B)False

Question 20

A check payable to stacked payees is ambiguous and thus payable only jointly-with the indorsements of all of the payees.

Accepted Answer

A) True 
 B)False

Exam 26: Transferability and Holder in Due Course

Machine Shop Inc. issues a payroll check drawn on Nation Bank "payable to the order of O'Dell." O'Dell takes the check to the bank and delivers it to the teller without signing it. This is

Correct Answer
verified

An instrument that requires an indorsement for negotiation must contain a handwritten signature.

Correct Answer
verified

Usually, an indorsement is unqualified, which means that the indorser is guaranteeing payment on an instrument, in addition to transferring title to it.

Correct Answer
verified

Correct Answer
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No, Rochelle does not acquire Terry's HD...
View Answer

Raul wants to transfer a check to Schmidt. The check is defective if it

Correct Answer
verified

Neither an ordinary holder nor an HDC can enforce an instrument that was originally incomplete and later completed in an unauthorized manner.

Correct Answer
verified
False

Kris transfers a note, on which Lin is the maker, to Mari, who takes it for value and in good faith. Mari knows that Kris breached the contract underlying the note, giving Lin a defense against payment. With respect to this note, Mari is

Correct Answer
verified

On the back of a check payable to Lo, she writes "Pay to Mei, without recourse" and signs it. This

Correct Answer
verified

Generally, an indorser, merely by indorsing, impliedly promises to the pay the holder, or any subsequent endorser the amount of the instrument if the drawer or maker defaults.

Correct Answer
verified

An insurance agent who receives a check payable to the agent when the item was actually intended as payment to the insurance company is required to make good on the check if it is later dishonored.

Correct Answer
verified

Muni Investment Company signs a check payable to Notes & Loans Inc. to buy a promissory note executed by Omni Corporation. This check

Correct Answer
verified

To make Credit Bank a collecting agent on a check "payable to the order of Duane," Duane should

Correct Answer
verified
A

Rafe signs a check payable to Shop Mart, which transfers the note by negotiation to Trans-State Bank. With respect to any defenses to payment on the note that Rafe could have raised against Shop Mart, most likely Rafe can

Correct Answer
verified

Keyes negotiates a bearer instrument to Liu by delivery

Correct Answer
verified

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

Correct Answer
verified
D

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she

Correct Answer
verified

Farmers Field LLC negotiates a bearer instrument to Grain Co-op by delivery

Correct Answer
verified

The assignee of a negotiable instrument receives only those rights that the assignor had before the assignment.

Correct Answer
verified

The holder of a note who needs the funds owed on it can transfer it for cash to a third party, whom the maker must pay when the note comes due.

Correct Answer
verified

A check payable to stacked payees is ambiguous and thus payable only jointly-with the indorsements of all of the payees.

Correct Answer
verified

Exam 26: Transferability and Holder in Due Course

Machine Shop Inc. issues a payroll check drawn on Nation Bank "payable to the order of O'Dell." O'Dell takes the check to the bank and delivers it to the teller without signing it. This is

Correct AnswerverifiedShow Answer

An instrument that requires an indorsement for negotiation must contain a handwritten signature.

Correct AnswerverifiedShow Answer

Usually, an indorsement is unqualified, which means that the indorser is guaranteeing payment on an instrument, in addition to transferring title to it.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNo, Rochelle does not acquire Terry's HD...View AnswerShow Answer

Raul wants to transfer a check to Schmidt. The check is defective if it

Correct AnswerverifiedShow Answer

Neither an ordinary holder nor an HDC can enforce an instrument that was originally incomplete and later completed in an unauthorized manner.

Correct AnswerverifiedFalse

Kris transfers a note, on which Lin is the maker, to Mari, who takes it for value and in good faith. Mari knows that Kris breached the contract underlying the note, giving Lin a defense against payment. With respect to this note, Mari is

Correct AnswerverifiedShow Answer

On the back of a check payable to Lo, she writes "Pay to Mei, without recourse" and signs it. This

Correct AnswerverifiedShow Answer

Generally, an indorser, merely by indorsing, impliedly promises to the pay the holder, or any subsequent endorser the amount of the instrument if the drawer or maker defaults.

Correct AnswerverifiedShow Answer

An insurance agent who receives a check payable to the agent when the item was actually intended as payment to the insurance company is required to make good on the check if it is later dishonored.

Correct AnswerverifiedShow Answer

Muni Investment Company signs a check payable to Notes & Loans Inc. to buy a promissory note executed by Omni Corporation. This check

Correct AnswerverifiedShow Answer

To make Credit Bank a collecting agent on a check "payable to the order of Duane," Duane should

Correct AnswerverifiedA

Rafe signs a check payable to Shop Mart, which transfers the note by negotiation to Trans-State Bank. With respect to any defenses to payment on the note that Rafe could have raised against Shop Mart, most likely Rafe can

Correct AnswerverifiedShow Answer

Keyes negotiates a bearer instrument to Liu by delivery

Correct AnswerverifiedShow Answer

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

Correct AnswerverifiedD

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she

Correct AnswerverifiedShow Answer

Farmers Field LLC negotiates a bearer instrument to Grain Co-op by delivery

Correct AnswerverifiedShow Answer

The assignee of a negotiable instrument receives only those rights that the assignor had before the assignment.

Correct AnswerverifiedShow Answer

The holder of a note who needs the funds owed on it can transfer it for cash to a third party, whom the maker must pay when the note comes due.

Correct AnswerverifiedShow Answer

A check payable to stacked payees is ambiguous and thus payable only jointly-with the indorsements of all of the payees.

Correct AnswerverifiedShow Answer

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No, Rochelle does not acquire Terry's HD...
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False

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A

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D

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