Question 1

A person who knows that an instrument is overdue or has been dishonored cannot become a holder in due course.

Accepted Answer

A) True 
 B)False

Question 2

It is necessary that one own the instrument to be a "holder."

Accepted Answer

A) True 
 B)False

Question 3

An indorsement may be written on a paper other than the instrument itself as long as the paper with the indorsement is affixed to the instrument.

Accepted Answer

A) True 
 B)False

Question 4

One who is in possession of a negotiable instrument that is drawn,issued,or indorsed to him or to his order or that is indorsed in blank is a(n):

Accepted Answer

A)  bearer. 
B)  holder. 
C)  transferor. 
D)  assignee. 
A)  bearer. 
B)  holder. 
C)  transferor. 
D)  assignee.

Question 5

A "holder" may transfer the instrument,negotiate it,enforce payment of it subject to valid claims and defenses,and with some exceptions discharge it.

Accepted Answer

A) True 
 B)False

Question 6

Alice Jones receives a bonus of $500 from her boss.She needs cash for her vacation,so she indorses the check to Charlie who gives her $300 cash and an IOU for $200.When Charlie presents the check to Alice's company for payment,her boss says the check was meant for Alex Jones instead;it was all a big mistake.What will Charlie be able to collect from the company?

Accepted Answer

A)  $500 
B)  $300 
C)  $420 
D)  Nothing 
A)  $500 
B)  $300 
C)  $420 
D)  Nothing

Question 7

The Code provides that for checks,a reasonable time for demand for payment is sixty days,after which a purchaser should be on notice the paper is overdue for the purpose of becoming a holder in due course.

Accepted Answer

A) True 
 B)False

Question 8

The requirements for negotiation are the same for both order paper and bearer paper.

Accepted Answer

A) True 
 B)False

Question 9

The refusal to pay or accept an instrument when it becomes due is:

Accepted Answer

A)  the shelter rule. 
B)  dishonor. 
C)  demand. 
D)  discharge. 
A)  the shelter rule. 
B)  dishonor. 
C)  demand. 
D)  discharge.

Question 10

An executory promise is the giving of value to support holder in due course status.

Accepted Answer

A) True 
 B)False

Question 11

A transfer of order paper:

Accepted Answer

A)  gives the transferee the specifically enforceable right to have the unqualified indorsement of the transferor,whether the transfer was for value or not. 
B)  to a bank,such as the deposit of a check,without an indorsement requires the bank to provide the customer's indorsement. 
C)  not for value creates a presumption by the courts that the parties intended to negotiate rather than assign the paper. 
D)  for value creates a presumption by the courts that a negotiation was intended by the parties unless the parties have agreed that the transfer is to be an assignment,which requires no indorsement. 
A)  gives the transferee the specifically enforceable right to have the unqualified indorsement of the transferor,whether the transfer was for value or not. 
B)  to a bank,such as the deposit of a check,without an indorsement requires the bank to provide the customer's indorsement. 
C)  not for value creates a presumption by the courts that the parties intended to negotiate rather than assign the paper. 
D)  for value creates a presumption by the courts that a negotiation was intended by the parties unless the parties have agreed that the transfer is to be an assignment,which requires no indorsement.

Question 12

A negotiation is void if the transaction in which it occurs is void.

Accepted Answer

A) True 
 B)False

Question 13

Under the shelter rule,a person who is not a holder in due course can obtain the rights of a holder in due course.

Accepted Answer

A) True 
 B)False

Question 14

Erin stole a paycheck from Carl prior to his indorsing it.She then forged Carl's signature and transferred the check to a gas station which took it in good faith,for value,without notice,and without reason to question its authenticity.The gas station:

Accepted Answer

A)  was a holder in due course. 
B)  could not be a holder. 
C)  could be a holder,but not a holder in due course. 
D)  can collect the amount of the check only from the drawer since Carl did not indorse it. 
A)  was a holder in due course. 
B)  could not be a holder. 
C)  could be a holder,but not a holder in due course. 
D)  can collect the amount of the check only from the drawer since Carl did not indorse it.

Question 15

Time paper that states it is due on July 1,a Sunday,is overdue on:

Accepted Answer

A)  July 1. 
B)  July 2. 
C)  July 3. 
D)  It depends on when the instrument is presented for payment. 
A)  July 1. 
B)  July 2. 
C)  July 3. 
D)  It depends on when the instrument is presented for payment.

Question 16

Buying a negotiable instrument at a discounted price demonstrates lack of good faith.

Accepted Answer

A) True 
 B)False

Question 17

Bearer paper runs to whomever is in possession of it.

Accepted Answer

A) True 
 B)False

Question 18

Alexander Schwing indorses his check with his own name and the words "for deposit only." What type of indorsement is this?

Accepted Answer

A)  A blank indorsement 
B)  A special indorsement 
C)  An unrestrictive indorsement 
D)  A blank,restrictive indorsement 
A)  A blank indorsement 
B)  A special indorsement 
C)  An unrestrictive indorsement 
D)  A blank,restrictive indorsement

Question 19

The type of indorsement used in first negotiating an instrument affects its subsequent negotiation.

Accepted Answer

A) True 
 B)False

Question 20

A negotiation obtained by duress,mistake,or fraud is ineffective to transfer the instrument.

Accepted Answer

A) True 
 B)False

Exam 27: Transfer and Holder in Due Course

A person who knows that an instrument is overdue or has been dishonored cannot become a holder in due course.

It is necessary that one own the instrument to be a "holder."

An indorsement may be written on a paper other than the instrument itself as long as the paper with the indorsement is affixed to the instrument.

One who is in possession of a negotiable instrument that is drawn,issued,or indorsed to him or to his order or that is indorsed in blank is a(n):

A "holder" may transfer the instrument,negotiate it,enforce payment of it subject to valid claims and defenses,and with some exceptions discharge it.

The Code provides that for checks,a reasonable time for demand for payment is sixty days,after which a purchaser should be on notice the paper is overdue for the purpose of becoming a holder in due course.

The requirements for negotiation are the same for both order paper and bearer paper.

The refusal to pay or accept an instrument when it becomes due is:

An executory promise is the giving of value to support holder in due course status.

A transfer of order paper:

A negotiation is void if the transaction in which it occurs is void.

Under the shelter rule,a person who is not a holder in due course can obtain the rights of a holder in due course.

Erin stole a paycheck from Carl prior to his indorsing it.She then forged Carl's signature and transferred the check to a gas station which took it in good faith,for value,without notice,and without reason to question its authenticity.The gas station:

Time paper that states it is due on July 1,a Sunday,is overdue on:

Buying a negotiable instrument at a discounted price demonstrates lack of good faith.

Bearer paper runs to whomever is in possession of it.

Alexander Schwing indorses his check with his own name and the words "for deposit only." What type of indorsement is this?

The type of indorsement used in first negotiating an instrument affects its subsequent negotiation.

A negotiation obtained by duress,mistake,or fraud is ineffective to transfer the instrument.

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