Question 1

A person who signs an instrument and lends his or her name, and credit to another party to the instrument is referred to as a(n)________.

Accepted Answer

A) agent 
B) qualified indorser 
C) unqualified indorser 
D) accommodation party 
A) agent 
B) qualified indorser 
C) unqualified indorser 
D) accommodation party

Question 2

Which of the following actions by the holder causes an impairment of the right of recourse?

Accepted Answer

A) releasing an obligor party from liability 
B) withholding collateral that would benefit that party 
C) writing canceled on the face of the instrument 
D) destruction of the instrument with the intent of eliminating the obligation 
A) releasing an obligor party from liability 
B) withholding collateral that would benefit that party 
C) writing canceled on the face of the instrument 
D) destruction of the instrument with the intent of eliminating the obligation

Question 3

Which of the following actions by a holder constitutes the complete cancellation of a negotiable instrument?

Accepted Answer

A) intentionally destroying the negotiable instrument to eliminate obligation 
B) deliberately striking out the signature of an indorser 
C) releasing an obligor from liability 
D) surrendering collateral without the consent of the parties who would benefit from it 
A) intentionally destroying the negotiable instrument to eliminate obligation 
B) deliberately striking out the signature of an indorser 
C) releasing an obligor from liability 
D) surrendering collateral without the consent of the parties who would benefit from it

Question 4

A ________ defense is a type of defense that can be raised against both holders and HDCs.

Accepted Answer

A) universal 
B) personal 
C) fraud in the inducement 
D) breach of contract 
A) universal 
B) personal 
C) fraud in the inducement 
D) breach of contract

Question 5

Harold borrows $20, 000 from Alex and signs a note promising to pay Alex this amount plus interest in one year.Alex negotiates the note to Reese, an HDC.Before the note is due, Harold declares bankruptcy and the court finds it to be true.According to the discharge in bankruptcy defense, which of the following is true?

Accepted Answer

A) Reese can recover from Harold. 
B) Reese can recover from Alex. 
C) Alex can recover from Harold. 
D) Reese cannot enforce the instrument. 
A) Reese can recover from Harold. 
B) Reese can recover from Alex. 
C) Alex can recover from Harold. 
D) Reese cannot enforce the instrument.

Question 6

An accommodation party is secondarily liable in case the accommodation is in a ________.

Accepted Answer

A) guarantee of promise 
B) guarantee of demand 
C) guarantee of collection 
D) guarantee of payment 
A) guarantee of promise 
B) guarantee of demand 
C) guarantee of collection 
D) guarantee of payment

Question 7

The payee of a cashier's check is also primarily liable on the instrument.

Accepted Answer

A) True 
 B)False

Question 8

In which of the following consumer credit transactions does the FTC HDC rule apply?

Accepted Answer

A) when the buyer signs a sales contract that includes a check 
B) when the buyer signs a sales contract that includes a promissory note 
C) when the buyer signs an installment sales contract that does not contain a waiver of defenses clause 
D) when the buyer arranges financing with a third-party lender 
A) when the buyer signs a sales contract that includes a check 
B) when the buyer signs a sales contract that includes a promissory note 
C) when the buyer signs an installment sales contract that does not contain a waiver of defenses clause 
D) when the buyer arranges financing with a third-party lender

Question 9

Which of the following has primary liability when it comes to instruments with a promise to pay?

Accepted Answer

A) the person in physical possession of the instrument 
B) the drawer of the instrument 
C) the drawee of the instrument 
D) the payee of the instrument 
A) the person in physical possession of the instrument 
B) the drawer of the instrument 
C) the drawee of the instrument 
D) the payee of the instrument

Question 10

Calvin, a college student, wants to purchase an automobile on credit from IronTilt Motors.He does not have sufficient income or the credit history to justify the extension of credit to him alone.Calvin asks his father to cosign a note to IronTilt Motors, which he does.
-What role does Calvin's father fulfill here so that Calvin can buy the car?

Accepted Answer

A) an accommodation party 
B) an agent 
C) a principal 
D) a qualified indorser 
A) an accommodation party 
B) an agent 
C) a principal 
D) a qualified indorser

Question 11

Those who disclaim liability and are not secondarily liable on instruments they endorse are referred to as ________.

Accepted Answer

A) unqualified indorsers 
B) qualified indorsers 
C) agents 
D) accommodation parties 
A) unqualified indorsers 
B) qualified indorsers 
C) agents 
D) accommodation parties

Question 12

A person who has been authorized to sign a negotiable instrument on behalf of another person is known as a(n)________.

Accepted Answer

A) holder in due course 
B) accommodation party 
C) agent 
D) principal 
A) holder in due course 
B) accommodation party 
C) agent 
D) principal

Question 13

Signature liability is applicable to bearer papers.

Accepted Answer

A) True 
 B)False

Question 14

The defense of breach of contract is effective against an HDC.

Accepted Answer

A) True 
 B)False

Question 15

In which of the following accommodations is an accommodation party primarily liable?

Accepted Answer

A) in a guarantee of payment 
B) in a guarantee of collection 
C) in a guarantee of demand 
D) in a guarantee of promise 
A) in a guarantee of payment 
B) in a guarantee of collection 
C) in a guarantee of demand 
D) in a guarantee of promise

Question 16

A minor who does not misrepresent his or her age can disaffirm negotiable instruments.

Accepted Answer

A) True 
 B)False

Question 17

The FTC rules applies to consumer credit transactions in which the buyer signs a sales contract that includes an order to pay.

Accepted Answer

A) True 
 B)False

Question 18

Adjudicated mental incompetence is a universal defense that can be raised against holders and HDCs.

Accepted Answer

A) True 
 B)False

Question 19

Transfer warranties cannot be disclaimed with respect to checks.

Accepted Answer

A) True 
 B)False

Question 20

Correcting the figure on a check to correspond to the written amount on the check is not considered material alteration.

Accepted Answer

A) True 
 B)False

Exam 24: Liability, Defenses, and Discharge

A person who signs an instrument and lends his or her name, and credit to another party to the instrument is referred to as a(n)________.

Which of the following actions by the holder causes an impairment of the right of recourse?

Which of the following actions by a holder constitutes the complete cancellation of a negotiable instrument?

A ________ defense is a type of defense that can be raised against both holders and HDCs.

An accommodation party is secondarily liable in case the accommodation is in a ________.

The payee of a cashier's check is also primarily liable on the instrument.

In which of the following consumer credit transactions does the FTC HDC rule apply?

Which of the following has primary liability when it comes to instruments with a promise to pay?

Those who disclaim liability and are not secondarily liable on instruments they endorse are referred to as ________.

A person who has been authorized to sign a negotiable instrument on behalf of another person is known as a(n)________.

Signature liability is applicable to bearer papers.

The defense of breach of contract is effective against an HDC.

In which of the following accommodations is an accommodation party primarily liable?

A minor who does not misrepresent his or her age can disaffirm negotiable instruments.

The FTC rules applies to consumer credit transactions in which the buyer signs a sales contract that includes an order to pay.

Adjudicated mental incompetence is a universal defense that can be raised against holders and HDCs.

Transfer warranties cannot be disclaimed with respect to checks.

Correcting the figure on a check to correspond to the written amount on the check is not considered material alteration.

Legal Heritage and the Digital Age

Courts and Jurisdiction

Judicial,Alternative,and E-Dispute Resolution

Constitutional Law for Business and E-Commerce

Intentional Torts and Negligence

Product and Strict Liability

Intellectual Property and Cyber Piracy

Criminal Law and Cyber Crimes

Nature of Traditional and E-Contracts

Agreement

Consideration and Promissory Estoppel

Capacity and Legality

Genuineness of Assent and Undue Influence

Statute of Frauds and Equitable Exceptions

Third-Party Rights and Discharge

Remedies for Breach of Traditional and E-Contracts

E-Commerce and Digital Law

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties

Creation of Negotiable Instruments

Holder in Due Course and Transferability

Banks, E-Money, and Financial Reform

Credit,Mortgages,and Debtor's Rights

Secured Transactions and E-Filing

Bankruptcy and Reorganization

Agency Formation and Termination

Liability of Principals, Agents, and Independent Contractors

Employment, Worker Protection, and Immigration Law

Labor Law and Collective Bargaining

Equal Opportunity in Employment

Small Business, Entrepreneurship, and General Partnerships

Limited Partnerships and Special Partnerships

Corporate Formation and Financing

Corporate Governance and the Sarbanes-Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchises and Special Forms of Businesses

Investor Protection, E-Securities, and Wall Street Reform

Ethics and Social Responsibility of Business

Administrative Law and Regulatory Agencies

Consumer Protection and Product Safety

Environmental Protection

Antitrust Law and Unfair Trade Practices

Personal Property and Bailment

Real Property

Landlord-Tenant Law and Land Use Regulation

Insurance

Accountants' Duties and Liability

Wills Trusts and Estates

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