Question 1

If Elin delivers a check payable to her order to First Bank without signing it and receives cash, the transfer is an assignment, not a negotiation.

Accepted Answer

A) True 
 B)False  True

Question 2

Employment Company draws a check payable to Felix. Felix indorses the back and negotiates the check to Guaranty Bank. Primarily liable on the check is

Accepted Answer

A)  Employment Company. 
B)  Felix. 
C)  Guaranty Bank. 
D)  none of the choices. 
A)  Employment Company. 
B)  Felix. 
C)  Guaranty Bank. 
D)  none of the choices. D

Question 3

Logan is Mining Corporation's agent and is authorized to write checks on Mining's account in Northwest Bank. Logan writes a check "pay to the order of Oceanside Resort." Logan signs the check "Mining Corporation, by Logan, agent." Northwest Bank dishonors the check. Liability extends to

Accepted Answer

A)  Logan. 
B)  Oceanside. 
C)  Mining Corporation. 
D)  no one. 
A)  Logan. 
B)  Oceanside. 
C)  Mining Corporation. 
D)  no one. C

Question 4

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 5

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. 
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.

Question 6

Jill, in good faith and for value, gets from Kiley a negotiable bearer instrument. Jill does not know that Kiley stole the instrument. Jill is

Accepted Answer

A)  an HDC. 
B)  not an HDC, because Kiley did not acquire the instrument for value. 
C)  not an HDC, because Kiley did not acquire the instrument in good faith. 
D)  not an HDC, because Kiley transferred the instrument without notice. 
A)  an HDC. 
B)  not an HDC, because Kiley did not acquire the instrument for value. 
C)  not an HDC, because Kiley did not acquire the instrument in good faith. 
D)  not an HDC, because Kiley transferred the instrument without notice.

Question 7

With an order instrument, the payee must be identified with certainty because the transfer of the instrument requires his or her signature.

Accepted Answer

A) True 
 B)False

Question 8

To determine the value of an instrument, it is necessary to know when the maker, drawer, or acceptor is required to pay.

Accepted Answer

A) True 
 B)False

Question 9

Jane signs an instrument using a "J" with a swirl around it. With this mark for a signature, the instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because an initial does not state the signer's name. 
C)  nonnegotiable, because an initial is not a signature. 
D)  nonnegotiable, because a simple initial implies a lack of binding intent. 
A)  negotiable. 
B)  nonnegotiable, because an initial does not state the signer's name. 
C)  nonnegotiable, because an initial is not a signature. 
D)  nonnegotiable, because a simple initial implies a lack of binding intent.

Question 10

In terms of requirements for holder-in-due-course (HDC) status, first a party must be a holder of a negotiable instrument.

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. 
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.

Question 12

On an instrument, a mere reference to another writing-"As per contract"- does not render the instrument nonnegotiable.

Accepted Answer

A) True 
 B)False

Question 13

Equity Credit Company has in its possession an instrument dated May 1, 2019. The instrument is payable to the order of First Choice Moving & Storage Company "on June 1, 2020," for $5,000. In the upper left corner is an address for Greater Metro Development Corporation-10 Corporate Park Avenue, Chicago, Illinois-and in the lower right corner is the signature of "Hilltop Investments, Inc., By Ida, President." In the lower left corner is stamped "ACCEPTED: Greater Metro Development Corporation by John, President, May 5, 2019." On the back is the signature of "First Choice Moving & Storage Company by Kathleen, President." Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?

Accepted Answer

No one is primarily liable on this instr

Question 14

A holder who takes a negotiable instrument from a thief cannot become an HDC even if the item was acquired in good faith and there was no reason to be suspicious of the transaction.

Accepted Answer

A) True 
 B)False

Question 15

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)  all of the choices. 
A)  is clearly stamped "insufficient funds." 
B)  contains handwritten terms. 
C)  is undated. 
D)  all of the choices.

Question 16

Emily writes and signs a check payable to "Festival Cinema." Georg, Festival's manager, indorses the check "For deposit only." This is

Accepted Answer

A)  a blank indorsement. 
B)  a qualified indorsement. 
C)  a restrictive indorsement. 
D)  a special indorsement. 
A)  a blank indorsement. 
B)  a qualified indorsement. 
C)  a restrictive indorsement. 
D)  a special indorsement.

Question 17

To operate practically as a substitute for cash or a credit device, a negotiable instrument must be

Accepted Answer

A)  conditional without the risk of being collectable. 
B)  transferable without the danger of being uncollectable. 
C)  qualified with a promise to set aside the qualification. 
D)  payable without recourse. 
A)  conditional without the risk of being collectable. 
B)  transferable without the danger of being uncollectable. 
C)  qualified with a promise to set aside the qualification. 
D)  payable without recourse.

Question 18

Fred has six nieces, ages five to sixteen. He writes an order instrument for $50 that states "Pay to the order of my niece." The order instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because the amount of money is less than $500. 
C)  nonnegotiable, because it is illegal to write an order instrument payable to a relative. 
D)  nonnegotiable, because there is no specific person identified. 
A)  negotiable. 
B)  nonnegotiable, because the amount of money is less than $500. 
C)  nonnegotiable, because it is illegal to write an order instrument payable to a relative. 
D)  nonnegotiable, because there is no specific person identified.

Question 19

Rico agrees to buy a bicycle from Salvatore for $250. Salvatore agrees to deliver the bike on September 1. Rico writes a draft for $250 payable to Salvatore on September 1. This is

Accepted Answer

A)  none of the choices. 
B)  a time draft. 
C)  a sight draft. 
D)  a promissory note. 
A)  none of the choices. 
B)  a time draft. 
C)  a sight draft. 
D)  a promissory note.

Question 20

Any instrument that orders the drawee to pay a certain sum of money is a draft.

Accepted Answer

A) True 
 B)False

Exam 22: Negotiable Instruments

If Elin delivers a check payable to her order to First Bank without signing it and receives cash, the transfer is an assignment, not a negotiation.

Employment Company draws a check payable to Felix. Felix indorses the back and negotiates the check to Guaranty Bank. Primarily liable on the check is

Logan is Mining Corporation's agent and is authorized to write checks on Mining's account in Northwest Bank. Logan writes a check "pay to the order of Oceanside Resort." Logan signs the check "Mining Corporation, by Logan, agent." Northwest Bank dishonors the check. Liability extends to

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.

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

Jill, in good faith and for value, gets from Kiley a negotiable bearer instrument. Jill does not know that Kiley stole the instrument. Jill is

With an order instrument, the payee must be identified with certainty because the transfer of the instrument requires his or her signature.

To determine the value of an instrument, it is necessary to know when the maker, drawer, or acceptor is required to pay.

Jane signs an instrument using a "J" with a swirl around it. With this mark for a signature, the instrument is

In terms of requirements for holder-in-due-course (HDC) status, first a party must be a holder of a negotiable instrument.

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

On an instrument, a mere reference to another writing-"As per contract"- does not render the instrument nonnegotiable.

A holder who takes a negotiable instrument from a thief cannot become an HDC even if the item was acquired in good faith and there was no reason to be suspicious of the transaction.

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

Emily writes and signs a check payable to "Festival Cinema." Georg, Festival's manager, indorses the check "For deposit only." This is

To operate practically as a substitute for cash or a credit device, a negotiable instrument must be

Fred has six nieces, ages five to sixteen. He writes an order instrument for $50 that states "Pay to the order of my niece." The order instrument is

Rico agrees to buy a bicycle from Salvatore for $250. Salvatore agrees to deliver the bike on September 1. Rico writes a draft for $250 payable to Salvatore on September 1. This is

Any instrument that orders the drawee to pay a certain sum of money is a draft.

Law and Legal Reasoning

Constitutional Law

Ethics in Business

Courts and Alternative Dispute Resolution

Tort Law

Product Liability

Intellectual Property Rights

Internet Law, Social Media, and Privacy

Criminal Law and Cyber Crime

Nature and Classification

Agreement

Consideration

Capacity and Legality

Voluntary Consent

The Statute of Fraudswriting Requirement

Performance and Discharge

Breach and Remedies

Third Party Rights

The Formation of Sales and Lease Contracts

Title and Risk of Loss

Performance and Breach of Sales and Lease Contracts

International and Space Law

Banking in the Digital Age

Security Interests and Creditors Rights

Bankruptcy

Agency Relationships in Business

Employment, Immigration, and Labor Law

Employment Discrimination

Sole Proprietorships and Franchises

All Forms of Partnership

Limited Liability Companies and Special Business Forms

Corporate Formation and Financing

Corporate Directors, Officers, and Shareholders

Corporate Mergers, Takeovers, and Termination

Investor Protection, Insider Trading, and Corporate Governance

Administrative Law

Antitrust Law and Promoting Competition

Consumer and Environmental Law

Liability of Accountants and Other Professionals

Personal Property and Bailments

Real Property and Landlord-Tenant Law

Insurance, Wills, and Trusts

Filters