Question 1

For negotiation, which of the following types of paper require delivery and an endorsement by the holder?

Accepted Answer

A)   Bearer
B)   Delivery
C)   Order
D)   Transfer
E)   AcknowledgementF) None of the above
G) A) and B)

Question 2

For negotiation, ________ requires only delivery of the instrument to the holder by the payee

Accepted Answer

A)   bearer paper
B)   an endorsement
C)   order paper
D)   a transfer
E)   an acknowledgementF) A) and B)
G) A) and C)

Question 3

A negotiable instrument cannot be ________ if it is accidentally found or given to the wrong person.

Accepted Answer

A)   accepted
B)   effective
C)   valid
D)   delivered
E)   handledF) D) and E)
G) All of the above

Question 4

The FTC created several rules in the 1970's that helped protect consumers against HDC abuses. What do these rules required every consumer credit contract or any purchase money loan to contain?

Accepted Answer

The FTC created several rules in the 197...

Question 5

Which of the following words are necessary for an endorsement to be considered qualified?

Accepted Answer

A)   Addition of the words, "special endorsement."
B)   Addition of the words, "restricted endorsement."
C)   Addition of the words, "without recourse."
D)   Addition of the words, "conditional entrustment."
E)   Addition of the words, "trust endorsement."F) A) and C)
G) A) and D)

Question 6

What is meant by the term "delivery" in the process of negotiation?

Accepted Answer

A)   The physical handing of an instrument from someone entitled to it, to the person intended to receive it.
B)   The passing of a warranty that the instrument is collectible.
C)   The passing of a warranty that an instrument qualifies as a negotiable instrument.
D)   The passing of a warranty that the recipient is a holder.
E)   The passing of a warranty that the recipient is a holder in due course.F) C) and D)
G) A) and B)

Question 7

An endorsement that restricts the instrument such that it must be collected by a bank for the endorser or for a particular account and cannot be cashed is which of the following?

Accepted Answer

A)   Conditional endorsement.
B)   Trust endorsement.
C)   Endorsement for deposit or collection only.
D)   Endorsement that prohibits further endorsement.
E)   Special qualified endorsement.F) None of the above
G) A) and B)

Question 8

[Lost Check] Jenna Nguyen teaches business law at Learn-A-Lot University. Learn-A-Lot requested that all of the teachers ask the students to wear T-shirts with "Learn-A-Lot University Football" printed on the front on the day of the first football game. All of the teachers were asked to sell the shirts in class. A student, Quinn, wrote a check to Jenna for $10 for payment for one of the shirts. Quinn, however, put Jenna Nguyen as the payee. Jenna wanted to turn the check over to the school, so on the back of the check, she wrote, "Jenna Nguyen, without recourse." She then gave the check to the treasurer for Learn-A-Lot University, Amelia. Unfortunately, the treasurer for Learn-A-Lot dropped the check on the ground as she was going to the bank. A student, Brad, found the check and promptly took it to the bank and cashed it. The treasurer, Amelia, did not want to get into trouble, so she asked Jenna to personally cover the check because she said that Jenna had endorsed the check on the back guaranteeing payment.
-Would the school be able to require that Jenna cover the amount of the check based on the law of negotiable instruments?

Accepted Answer

A)   Yes, because she signed on the back with a blank unqualified endorsement.
B)   Yes, because she signed on the back with a special qualified endorsement.
C)   Yes, because she signed on the back regardless of the type of endorsement.
D)   No, because she signed on the back using the words, "without recourse."
E)   No, because the check was not properly delivered to Brad.F) All of the above
G) C) and D)

Question 9

The statement, "Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

Accepted Answer

A)   Conditional endorsement.
B)   Trust endorsement.
C)   Endorsement to prohibit further endorsement.
D)   Bearer endorsement.
E)   Conditional bearer endorsement.F) A) and B)
G) B) and D)

Question 10

Which of the following is not an example of a restrictive endorsement?

Accepted Answer

A)   The endorsement for deposit or collection only.
B)   The endorsement to prohibit further endorsement.
C)   The conditional endorsement.
D)   The trust endorsement.
E)   The endorsement specifying without recourse.F) D) and E)
G) A) and D)

Question 11

An order instrument is payable to ________.

Accepted Answer

A)   anyone holding the instrument
B)   any bank.
C)   a specific, named payee.
D)   a future person to be determined.
E)   any trust.F) None of the above
G) B) and D)

Question 12

Under which of the following circumstances does a holder taking an instrument for value not become a holder in due course?

Accepted Answer

A)   If the holder acquires a security interest or some other lien in the instrument.
B)   If the holder purchases the instrument at a judicial sale or under legal process.
C)   If the holder takes the instrument for payment of a preceding claim.
D)   If the holder performs the promise for which the instrument was issued.
E)   If the holder exchanges the instrument for an irrevocable obligation to a third party.F) D) and E)
G) B) and E)

Question 13

When an instrument is being transferred to an agent or trustee for the benefit of either the endorser or a third party, which kind of endorsement is used?

Accepted Answer

A)   Conditional endorsement.
B)   Trust endorsement.
C)   Endorsement to prohibit further endorsement.
D)   Bearer endorsement.
E)   Conditional bearer endorsement.F) B) and E)
G) D) and E)

Question 14

An instrument is dishonored when a party refuses to pay the instrument, such as when a bank refuses to pay because insufficient funds exist.

Accepted Answer

A) True 
 B)False

Question 15

A(n)  ________ instrument becomes overdue at any time after the expressed due date on it.

Accepted Answer

A)   demand
B)   overdue
C)   dishonored
D)   time
E)   illegalF) All of the above
G) A) and B)

Question 16

Which statement is true regarding the requirement that a party take an instrument for value in order to be considered a holder in due course?

Accepted Answer

A)   The party must provide consideration.
B)   The party must have provided a bargained-for promise.
C)   The party must take the instrument in exchange for a promise that has already been performed.
D)   The party must have begun performance on a promise and have provided consideration.
E)   The party must have provided consideration or received the note as a gift.F) A) and B)
G) None of the above

Question 17

[House Painting] Graciela Reyes signed a check agreeing to pay, "Annie Greene, Marney Harris," $1,000. The payment was for painting her house. A problem with the note was that it spelled Annie's last name, "Greene," whereas Annie spells it simply, "Green." Annie and Marney were having a disagreement regarding how to split up the funds for painting the house. Annie proceeded to sign the check on the back, "Annie Green," and presented it to Hiro Murakami to satisfy a debt that she owed him. Hiro Murakami endorsed the check on the back, "Hiro Murakami, without recourse," and gave it to his nephew, Nate, who took it to the bank for payment. Meanwhile, Graciela has stopped payment on the check because, following a rainstorm, all the paint on the house looked spotted. Marney is unhappy because she did not obtain any of the funds and stated that Annie could not legally endorse the instrument because it misspelled her name and also because she, Marney, did not sign it.
-Which of the following is true regarding Marney's claim that the endorsement by Annie was illegal because the note misspelled Annie's name?

Accepted Answer

A)   Marney is correct.
B)   Marney is correct, but only because Annie signed the note, "Green," instead of "Greene," as such was on the note.
C)   Marney is correct, but only because two payees are listed.
D)   Marney is incorrect.
E)   Marney is incorrect unless she can prove that Graciela intentionally and purposefully spelled the name wrong to prevent negotiation.F) A) and D)
G) A) and E)

Question 18

[Check Issues] Kelsey owns and operates a currency exchange. A regular customer, Rafe, comes in and cashes a $2,000 check issued by ABC Trucking. The day after Kelsey cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the checks she cashed for Rafe had been stolen. At the time she took the check, Kelsey 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. Kelsey 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 Rafe's check, she took a check from another customer, Brett. It was later discovered that the check, which was four months old, was the subject of a dispute between Brett and the issuer of the check for whom Brett had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Brett had stopped payment on the checks. Kelsey claimed that as a holder in due course, she was entitled to payment on both checks.
-What is the effect on Kelsey's status as a holder in due course in taking from the customer the check that was four months old?

Accepted Answer

A)   There is no effect on her status as a holder in due course because an instrument such as a check is only considered overdue if it is outstanding for 150 days.
B)   There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for 180 days.
C)   There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for one year.
D)   It has no effect because a check is never considered overdue.
E)   She would not be considered a holder in due course because a check is considered overdue 90 days after its date.F) B) and E)
G) A) and C)

Question 19

If an issuer forgets to write the date on a check, what is the effect?

Accepted Answer

A)   The payee may write in the date consistent with the intent of the issuer, but must put a notation on the check to the effect that it was altered.
B)   The payee may write in the date consistent with the intent of the issuer and may transfer the check to a holder in due course.
C)   The payee may write in the date consistent with the intent of the issuer, but may not transfer the check to a holder in due course.
D)   The check is no good, cannot be completed by anyone, and should be destroyed.
E)   The check is good only if the payee can get in touch with the issuer and have the issuer fill in the appropriate date.F) B) and E)
G) B) and C)

Question 20

For an HDC to take an instrument "in good faith," how does the UCC define good faith?

Accepted Answer

A)   Using the proper degree of caution that an objective, reasonable holder would have.
B)   Whether the holder himself acted honestly when taking the instrument.
C)   Under reasonable commercial standards of fair dealing.
D)   Whether the holder himself acted reasonably when taking the instrument.
E)   Good faith is not defined; it is left to the judgment of the individual HDC.F) B) and E)
G) A) and E)

Exam 27: Negotiation, Holder in Due Course, and Defenses

An instrument is dishonored when a party refuses to pay the instrument, such as when a bank refuses to pay because insufficient funds exist.

Correct Answer
verified

The statement, "Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

Correct Answer
verified

A negotiable instrument cannot be ________ if it is accidentally found or given to the wrong person.

Correct Answer
verified

What is meant by the term "delivery" in the process of negotiation?

Correct Answer
verified

Under which of the following circumstances does a holder taking an instrument for value not become a holder in due course?

Correct Answer
verified

For negotiation, ________ requires only delivery of the instrument to the holder by the payee

Correct Answer
verified

If an issuer forgets to write the date on a check, what is the effect?

Correct Answer
verified

Which of the following words are necessary for an endorsement to be considered qualified?

Correct Answer
verified

When an instrument is being transferred to an agent or trustee for the benefit of either the endorser or a third party, which kind of endorsement is used?

Correct Answer
verified

An endorsement that restricts the instrument such that it must be collected by a bank for the endorser or for a particular account and cannot be cashed is which of the following?

Correct Answer
verified

An order instrument is payable to ________.

Correct Answer
verified

Correct Answer
verified

For negotiation, which of the following types of paper require delivery and an endorsement by the holder?

Correct Answer
verified

The FTC created several rules in the 1970's that helped protect consumers against HDC abuses. What do these rules required every consumer credit contract or any purchase money loan to contain?

Correct Answer
verified
The FTC created several rules in the 197...
View Answer

A(n) ________ instrument becomes overdue at any time after the expressed due date on it.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following is not an example of a restrictive endorsement?

Correct Answer
verified

For an HDC to take an instrument "in good faith," how does the UCC define good faith?

Correct Answer
verified

Which statement is true regarding the requirement that a party take an instrument for value in order to be considered a holder in due course?

Correct Answer
verified

Exam 27: Negotiation, Holder in Due Course, and Defenses

An instrument is dishonored when a party refuses to pay the instrument, such as when a bank refuses to pay because insufficient funds exist.

Correct AnswerverifiedShow Answer

The statement, "Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

Correct AnswerverifiedShow Answer

A negotiable instrument cannot be ________ if it is accidentally found or given to the wrong person.

Correct AnswerverifiedShow Answer

What is meant by the term "delivery" in the process of negotiation?

Correct AnswerverifiedShow Answer

Under which of the following circumstances does a holder taking an instrument for value not become a holder in due course?

Correct AnswerverifiedShow Answer

For negotiation, ________ requires only delivery of the instrument to the holder by the payee

Correct AnswerverifiedShow Answer

If an issuer forgets to write the date on a check, what is the effect?

Correct AnswerverifiedShow Answer

Which of the following words are necessary for an endorsement to be considered qualified?

Correct AnswerverifiedShow Answer

When an instrument is being transferred to an agent or trustee for the benefit of either the endorser or a third party, which kind of endorsement is used?

Correct AnswerverifiedShow Answer

An endorsement that restricts the instrument such that it must be collected by a bank for the endorser or for a particular account and cannot be cashed is which of the following?

Correct AnswerverifiedShow Answer

An order instrument is payable to ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For negotiation, which of the following types of paper require delivery and an endorsement by the holder?

Correct AnswerverifiedShow Answer

The FTC created several rules in the 1970's that helped protect consumers against HDC abuses. What do these rules required every consumer credit contract or any purchase money loan to contain?

Correct AnswerverifiedThe FTC created several rules in the 197...View AnswerShow Answer

A(n) ________ instrument becomes overdue at any time after the expressed due date on it.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an example of a restrictive endorsement?

Correct AnswerverifiedShow Answer

For an HDC to take an instrument "in good faith," how does the UCC define good faith?

Correct AnswerverifiedShow Answer

Which statement is true regarding the requirement that a party take an instrument for value in order to be considered a holder in due course?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The FTC created several rules in the 197...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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