Question 1

Which of the following applies to signers when determining signature liability?

Accepted Answer

A)  The location of the signature on an instrument usually determines the signer's capacity. 
B)  Qualified indorsers and agents are primarily or secondarily liable on the instrument. 
C)  Most indorsements appear on the front side of the instrument. 
D)  It is usually presumed that the indorsement is someone else's signature unless the instrument clearly indicates that it is that of the indorser. 
A)  The location of the signature on an instrument usually determines the signer's capacity. 
B)  Qualified indorsers and agents are primarily or secondarily liable on the instrument. 
C)  Most indorsements appear on the front side of the instrument. 
D)  It is usually presumed that the indorsement is someone else's signature unless the instrument clearly indicates that it is that of the indorser.

Question 2

An accommodation party who signs an instrument guaranteeing payment is secondarily liable on the instrument.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is true?

Accepted Answer

A)  The maker of a note has primary liability upon signing a note,but the drawer of a check does not have primary liability upon signing the check. 
B)  The maker of a note has primary liability upon signing the note and the drawer of a check has primary liability upon signing the check. 
C)  The maker of a note has primary liability upon signing the note,and the drawee of a check has primary liability upon the drawer's signing of the check. 
D)  The drawer of check has primary liability upon signing the check,but the maker of a note does not have primary liability upon signing the note. 
E)  The maker of a note does not have primary liability upon signing the note,nor does the drawer of a check upon signing the check. 
A)  The maker of a note has primary liability upon signing a note,but the drawer of a check does not have primary liability upon signing the check. 
B)  The maker of a note has primary liability upon signing the note and the drawer of a check has primary liability upon signing the check. 
C)  The maker of a note has primary liability upon signing the note,and the drawee of a check has primary liability upon the drawer's signing of the check. 
D)  The drawer of check has primary liability upon signing the check,but the maker of a note does not have primary liability upon signing the note. 
E)  The maker of a note does not have primary liability upon signing the note,nor does the drawer of a check upon signing the check.

Question 4

Which of the following will not discharge a party from liability on a negotiable instrument?

Accepted Answer

A)  payment by the party who is primarily liable 
B)  cancellation of the instrument 
C)  a subsequent holder releasing collateral securing the instrument 
D)  failing to comply with a restrictive indorsement 
A)  payment by the party who is primarily liable 
B)  cancellation of the instrument 
C)  a subsequent holder releasing collateral securing the instrument 
D)  failing to comply with a restrictive indorsement

Question 5

If Royce wanted to know which universal defenses against the payment of a negotiable instrument that he could use,which of the following would he have available to him?

Accepted Answer

A)  infancy or minority 
B)  extreme duress 
C)  discharge in bankruptcy 
D)  material alteration 
E)  All of these are correct. 
A)  infancy or minority 
B)  extreme duress 
C)  discharge in bankruptcy 
D)  material alteration 
E)  All of these are correct.

Question 6

When a drawee accepts a draft,the drawee becomes secondarily liable on the draft,because the drawer has the primary liability for payment.

Accepted Answer

A) True 
 B)False

Question 7

If an unauthorized agent signs a note on behalf of a principal,then only the agent is liable on the note.

Accepted Answer

A) True 
 B)False

Question 8

Betty Bongo,a real estate agent working for ABC Realty sells a home to Jason Biggs.Upon escrow closing,Betty signs the paperwork,"ABC Realty,by Betty Bogo,agent." Later it was determined that the home had Jason bought had a mold problem that should have been disclosed.Who is personally responsible on the instrument?

Accepted Answer

A)  Betty Bongo,as agent for ABC Realty 
B)  ABC realty 
C)  both Betty Bongo and ABC Realty 
D)  All of these are correct. 
E)  None of these are correct. 
A)  Betty Bongo,as agent for ABC Realty 
B)  ABC realty 
C)  both Betty Bongo and ABC Realty 
D)  All of these are correct. 
E)  None of these are correct.

Question 9

If Bill Snick presents a draft or check for payment of acceptance,which of the following presentment warranties is Bill Snick making?

Accepted Answer

A)  That he had good title to the check or is authorized to obtain payment or acceptance of the person who has good title. 
B)  That the instrument has not been materially altered. 
C)  That the presenter has no knowledge that the signature of the maker or drawer is unauthorized. 
D)  All of these are correct. 
A)  That he had good title to the check or is authorized to obtain payment or acceptance of the person who has good title. 
B)  That the instrument has not been materially altered. 
C)  That the presenter has no knowledge that the signature of the maker or drawer is unauthorized. 
D)  All of these are correct.

Question 10

Can transfer warranties be disclaimed?

Accepted Answer

A)  No; they cannot be disclaimed for any negotiable instruments. 
B)  Yes; they can be disclaimed for any negotiable instruments. 
C)  Yes; they can be disclaimed,but only by holders in due course. 
D)  Yes; they can be disclaimed,but only for bearer instruments. 
E)  Yes; they can be disclaimed,but only for instruments other than checks. 
A)  No; they cannot be disclaimed for any negotiable instruments. 
B)  Yes; they can be disclaimed for any negotiable instruments. 
C)  Yes; they can be disclaimed,but only by holders in due course. 
D)  Yes; they can be disclaimed,but only for bearer instruments. 
E)  Yes; they can be disclaimed,but only for instruments other than checks.

Question 11

Unqualified indorsers have no liability on negotiable instruments,as banks usually insure their customers accounts.

Accepted Answer

A) True 
 B)False

Question 12

When does acceptance of a draft occur?

Accepted Answer

A)  Acceptance occurs if an accommodation has occurred. 
B)  Acceptance occurs if an unqualified indorser is involved. 
C)  Acceptance of a draft occurs when the drawee writes the word acceptance across the face of the draft. 
D)  All of these are correct. 
A)  Acceptance occurs if an accommodation has occurred. 
B)  Acceptance occurs if an unqualified indorser is involved. 
C)  Acceptance of a draft occurs when the drawee writes the word acceptance across the face of the draft. 
D)  All of these are correct.

Question 13

What is the purpose of the Federal Trade Commission rule that eliminates the benefits of holder in due course status in certain consumer credit transactions?

Accepted Answer

A)  to protect merchants of goods from consumers improperly refusing to pay 
B)  to protect subsequent holders of consumer credit contracts from consumers improperly refusing to pay 
C)  to protect consumers from having to pay a holder in due course of a promissory note if the goods that gave rise to the note are defective 
D)  to encourage merchants to extend credit to consumers 
A)  to protect merchants of goods from consumers improperly refusing to pay 
B)  to protect subsequent holders of consumer credit contracts from consumers improperly refusing to pay 
C)  to protect consumers from having to pay a holder in due course of a promissory note if the goods that gave rise to the note are defective 
D)  to encourage merchants to extend credit to consumers

Question 14

A check,which is a special form of a draft,is accepted when it is certified by a bank.

Accepted Answer

A) True 
 B)False

Question 15

Qualified indorsers and agents that properly sign a negotiable instrument are not primarily or secondarily liable on the instrument.

Accepted Answer

A) True 
 B)False

Question 16

The drawer of a draft has primary liability on the draft when it is issued.

Accepted Answer

A) True 
 B)False

Question 17

What is the purpose and effect of eliminating the holder in due course provisions for consumer credit transactions? Will doing so raise the cost of borrowing for these consumers?

Accepted Answer

The holder in due course rule allowed a

Question 18

A special form of appointment is necessary in order to grant an agent authority to sign an instrument.

Accepted Answer

A) True 
 B)False

Question 19

An accommodation party can sign:

Accepted Answer

A)  only as maker or drawer 
B)  only as maker or indorser 
C)  only as maker,drawer,or indorser 
D)  only as acceptor or indorser 
E)  as maker,drawer,indorser,or acceptor 
A)  only as maker or drawer 
B)  only as maker or indorser 
C)  only as maker,drawer,or indorser 
D)  only as acceptor or indorser 
E)  as maker,drawer,indorser,or acceptor

Question 20

Qualified indorsers are secondarily liable on instruments because they have not expressly disclaimed liability.

Accepted Answer

A) True 
 B)False

Exam 24: Liability,Defenses and Discharge

Which of the following applies to signers when determining signature liability?

An accommodation party who signs an instrument guaranteeing payment is secondarily liable on the instrument.

Which of the following is true?

Which of the following will not discharge a party from liability on a negotiable instrument?

If Royce wanted to know which universal defenses against the payment of a negotiable instrument that he could use,which of the following would he have available to him?

When a drawee accepts a draft,the drawee becomes secondarily liable on the draft,because the drawer has the primary liability for payment.

If an unauthorized agent signs a note on behalf of a principal,then only the agent is liable on the note.

If Bill Snick presents a draft or check for payment of acceptance,which of the following presentment warranties is Bill Snick making?

Can transfer warranties be disclaimed?

Unqualified indorsers have no liability on negotiable instruments,as banks usually insure their customers accounts.

When does acceptance of a draft occur?

What is the purpose of the Federal Trade Commission rule that eliminates the benefits of holder in due course status in certain consumer credit transactions?

A check,which is a special form of a draft,is accepted when it is certified by a bank.

Qualified indorsers and agents that properly sign a negotiable instrument are not primarily or secondarily liable on the instrument.

The drawer of a draft has primary liability on the draft when it is issued.

What is the purpose and effect of eliminating the holder in due course provisions for consumer credit transactions? Will doing so raise the cost of borrowing for these consumers?

A special form of appointment is necessary in order to grant an agent authority to sign an instrument.

An accommodation party can sign:

Qualified indorsers are secondarily liable on instruments because they have not expressly disclaimed liability.

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