Exam 24: Liability, Defenses, and Discharge

Absolute liability to pay a negotiable instrument, subject to certain universal or real defenses is known as ________.

What is material alteration as a universal defense?

A qualified indorser is only liable for secondary liability.

Cameron, a purported agent, signs a contract and promissory note to purchase a building for Burnstar Constructions, a purported principal.Though Cameron is an unauthorized representative, Burnstar Constructions, the purported principal, likes the deal and accepts it.Which of the following is true of the deal ratified by Burnstar Constructions?

Personal and universal defenses can be raised against an ordinary holder of a negotiable instrument.

The purported principal is liable for an unauthorized signature by a purported agent.

Susan purchases goods by telephone from Parker.Susan has never met Parker.Brenton goes to Susan and pretends to be Parker.Susan draws a check payable to the order of Parker and gives the check to Brenton, believing him to be Parker.Brenton forges Parker's indorsement and indorses the check to his brother, William, with the term "without recourse." William then cashes the check at a liquor store.Under the imposter rule, who is liable on the check?

Presentment warranties are made by the drawer of a check or draft.

Which of the following actions renders all parties as discharged from liability to a negotiable instrument?

A situation in which certain parties are discharged from liability on an instrument by the action of the holder is called ________.

Implied warranties are made when the negotiable instrument is originally issued.

What are forged negotiable instruments?

If a universal defense is proven, the holder or HDC cannot recover on the instrument.

Those who are secondarily liable on negotiable instruments they endorse are known as ________.

Fraud in the inducement is a personal defense that is not effective against HDCs.

Extreme duress is considered a personal defense.

Transfer warranties cannot be disclaimed if the indorsement states "without recourse."

Stanley, who owes Milton money, indorses a draft to him with the term "without recourse." The instrument later is dishonored.Which of the following types of indorser is Stanley?

To which of the following placements of a negotiable instrument would transfer warranties be applicable?

What is the defense of fraud in the inducement?