Question 1

The notice requirement of the Federal Trade Commission rule for consumer credit contracts has the effect of:

Accepted Answer

A)  limiting the types of defenses to payment available to a consumer. 
B)  eliminating the real defenses to payment. 
C)  placing a holder in due course in the position of an assignee. 
D)  permitting a holder in due course to have a questionable instrument reviewed by the FTC. 
A)  limiting the types of defenses to payment available to a consumer. 
B)  eliminating the real defenses to payment. 
C)  placing a holder in due course in the position of an assignee. 
D)  permitting a holder in due course to have a questionable instrument reviewed by the FTC.

Question 2

Personal defenses include all but which of the following?

Accepted Answer

A)  Breach of contract 
B)  Fraud in the execution 
C)  Misrepresentation 
D)  Failure of consideration 
A)  Breach of contract 
B)  Fraud in the execution 
C)  Misrepresentation 
D)  Failure of consideration

Question 3

The fictitious payee rule is based on the idea that employers should bear the risk of their own unscrupulous employees.

Accepted Answer

A) True 
 B)False

Question 4

Both negotiable instruments and nonnegotiable undertakings are transferable by assignment and can result in the transferee's becoming a holder.

Accepted Answer

A) True 
 B)False

Question 5

Under the shelter rule,the transferee gets the rights of the transferor who is a holder in due course even if the transfer is not for value.

Accepted Answer

A) True 
 B)False

Question 6

Fraud in the execution of an instrument is a real defense which can be used against a holder in due course.

Accepted Answer

A) True 
 B)False

Question 7

Order paper is negotiated by:

Accepted Answer

A)  indorsement alone. 
B)  delivery alone. 
C)  either delivery or indorsement. 
D)  transfer of possession and indorsement. 
A)  indorsement alone. 
B)  delivery alone. 
C)  either delivery or indorsement. 
D)  transfer of possession and indorsement.

Question 8

Which of the following is a special unqualified indorsement?

Accepted Answer

A)  Pay to the order of John Doe,without recourse 
B)  For deposit only,John Jones 
C)  Without recourse,Sandra Adams 
D)  Pay to the order of April Smith 
A)  Pay to the order of John Doe,without recourse 
B)  For deposit only,John Jones 
C)  Without recourse,Sandra Adams 
D)  Pay to the order of April Smith

Question 9

The transfer of a nonnegotiable promise or order operates as an assignment.

Accepted Answer

A) True 
 B)False

Question 10

Blane indorsed his paycheck in blank and cashed it at a store where he was a well-known customer.The check was then stolen from the store.The store immediately notified Blane's employer,who gave the drawee bank a stop payment order.The thief indorsed the check in a false name and transferred the check to a gas station/convenience store,which took the check in good faith and for value.The check was dishonored when presented to the drawee bank.Which of the following statements is true?

Accepted Answer

A)  The thief was a holder within the Code definition and could negotiate the check. 
B)  The thief could not negotiate the check because he forged the indorsement. 
C)  The gas station/convenience store is entitled to nothing from the drawer of the check. 
D)  The gas station/convenience store could not be a holder in due course because it took the check from a thief. 
A)  The thief was a holder within the Code definition and could negotiate the check. 
B)  The thief could not negotiate the check because he forged the indorsement. 
C)  The gas station/convenience store is entitled to nothing from the drawer of the check. 
D)  The gas station/convenience store could not be a holder in due course because it took the check from a thief.

Question 11

What are the requirements for a transferee of a negotiable instrument to be a holder in due course?

Accepted Answer

To satisfy the requirements of UCC Secti

Question 12

All of the following are "real defenses" except a:

Accepted Answer

A)  note made by a minor. 
B)  check written while a gun is held to the drawer's head. 
C)  note given in exchange for worthless securities. 
D)  check fraudulently changed from $100 to $400. 
A)  note made by a minor. 
B)  check written while a gun is held to the drawer's head. 
C)  note given in exchange for worthless securities. 
D)  check fraudulently changed from $100 to $400.

Question 13

An indorsement stating "Pay Paula Hobson only":

Accepted Answer

A)  is designed to restrict the rights of the indorser. 
B)  is given the same effect as an unrestrictive indorsement. 
C)  will,under the Code,be effective to prohibit further transfer beyond Paula Hobson. 
D)  is labeled a "qualified indorsement," and it destroys negotiability. 
A)  is designed to restrict the rights of the indorser. 
B)  is given the same effect as an unrestrictive indorsement. 
C)  will,under the Code,be effective to prohibit further transfer beyond Paula Hobson. 
D)  is labeled a "qualified indorsement," and it destroys negotiability.

Question 14

Every indorsement is either blank or special.

Accepted Answer

A) True 
 B)False

Question 15

A blank indorsement converts order paper to bearer paper and leaves bearer paper as bearer paper.

Accepted Answer

A) True 
 B)False

Question 16

Art signs a promissory note payable to the order of Swains Jewelers for $8,000 for a wedding ring.If the owner of Swains simply signs "Swains Jewelers":

Accepted Answer

A)  the note is restrictively indorsed. 
B)  the indorsement is ineffective because the note will have to bear the signature of the person who indorsed it. 
C)  the note is negotiable by delivery. 
D)  the indorsement will be valid only if dated. 
A)  the note is restrictively indorsed. 
B)  the indorsement is ineffective because the note will have to bear the signature of the person who indorsed it. 
C)  the note is negotiable by delivery. 
D)  the indorsement will be valid only if dated.

Question 17

An indorsement limiting payment to a particular person is effective.

Accepted Answer

A) True 
 B)False

Question 18

A person other than the owner of an instrument cannot be entitled to enforce it.

Accepted Answer

A) True 
 B)False

Question 19

An indorsement that is not in the chain of title is assumed to be a(n):

Accepted Answer

A)  anomalous indorsement. 
B)  blank indorsement. 
C)  special indorsement. 
D)  indorsement in trust. 
A)  anomalous indorsement. 
B)  blank indorsement. 
C)  special indorsement. 
D)  indorsement in trust.

Question 20

A bearer instrument is comparable to cash in that it is negotiated by mere possession.

Accepted Answer

A) True 
 B)False

Exam 27: Transfer and Holder in Due Course

The notice requirement of the Federal Trade Commission rule for consumer credit contracts has the effect of:

Personal defenses include all but which of the following?

The fictitious payee rule is based on the idea that employers should bear the risk of their own unscrupulous employees.

Both negotiable instruments and nonnegotiable undertakings are transferable by assignment and can result in the transferee's becoming a holder.

Under the shelter rule,the transferee gets the rights of the transferor who is a holder in due course even if the transfer is not for value.

Fraud in the execution of an instrument is a real defense which can be used against a holder in due course.

Order paper is negotiated by:

Which of the following is a special unqualified indorsement?

The transfer of a nonnegotiable promise or order operates as an assignment.

What are the requirements for a transferee of a negotiable instrument to be a holder in due course?

All of the following are "real defenses" except a:

An indorsement stating "Pay Paula Hobson only":

Every indorsement is either blank or special.

A blank indorsement converts order paper to bearer paper and leaves bearer paper as bearer paper.

Art signs a promissory note payable to the order of Swains Jewelers for $8,000 for a wedding ring.If the owner of Swains simply signs "Swains Jewelers":

An indorsement limiting payment to a particular person is effective.

A person other than the owner of an instrument cannot be entitled to enforce it.

An indorsement that is not in the chain of title is assumed to be a(n):

A bearer instrument is comparable to cash in that it is negotiated by mere possession.

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

A: Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance,breach,and Discharge

Contract Remedies

Relationship of Principal and Agent

Relationship With Third Parties

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Products Liability: Warranties and Strict Liability in Tort

Sales Remedies

Form and Content

Liability of Parties

Bank Deposits,collections,and Funds Transfers

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature,formation,and Powers

Financial Structure

Management Structure

Fundamental Changes

Secured Transactions and Suretyship

Bankruptcy

Protection of Intellectual Property

Antitrust

Consumer Protection Double

Employment Law

Securities Regulation

Accountants Legal Liability

Environmental Law

International Business Law

Introduction to Property,property Insurance,bailments,and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Decedents Estates

Legal Terminology: Understanding Criminal and Civil Law Systems

Contract Law Terminology

Exploring the Legal Concepts of Agency and Fiduciary Duty

Understanding Key Legal Concepts in Sales and Contracts

Understanding the Terminology of Banking and Finance: Key Concepts and Definitions

Exploring Legal Concepts and Processes in Business Partnerships

Understanding Corporate Law: A Guide to Ultra Vires Acts, Subscribers, Debt Securities, and More

Understanding Key Terms in Secured Transactions and Bankruptcy Law

Legal Topics and Terms

Legal Topics in Property Ownership and Management