Question 1

A bank "gives value" when it allows a depositor to withdraw funds against a deposited item.

Accepted Answer

A) True 
 B)False

Question 2

Cynthia Todd is the holder of a check with the indorsement "Adam Brock." To protect herself, Cynthia may:

Accepted Answer

A) convert the special indorsement to a blank indorsement. 
B) convert the special indorsement to a qualified indorsement. 
C) write above Adam's signature, "Pay Cynthia Todd." 
D) not convert the indorsements, but could only protect her interest in the check by depositing it in her account as soon as possible. 
A) convert the special indorsement to a blank indorsement. 
B) convert the special indorsement to a qualified indorsement. 
C) write above Adam's signature, "Pay Cynthia Todd." 
D) not convert the indorsements, but could only protect her interest in the check by depositing it in her account as soon as possible.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Tony is fraudulently induced to issue a check to Rita.Tony has:

Accepted Answer

A) a claim to ownership of the check. 
B) a defense to Rita's demand for payment. 
C) neither a claim nor a defense. 
D) both a claim and a defense. 
A) a claim to ownership of the check. 
B) a defense to Rita's demand for payment. 
C) neither a claim nor a defense. 
D) both a claim and a defense.

Question 5

All of the following are "real defenses" except a:

Accepted Answer

A) note made by a minor. 
B) check written while a gun is held to the drawer's head. 
C) note given in exchange for worthless securities. 
D) check fraudulently changed from $100 to $400. 
A) note made by a minor. 
B) check written while a gun is held to the drawer's head. 
C) note given in exchange for worthless securities. 
D) check fraudulently changed from $100 to $400.

Question 6

Laura is in possession of a check which contains the following indorsement, "Sam Smith, without recourse, for collection only." The indorsement would be classified as:

Accepted Answer

A) blank, qualified, and restrictive. 
B) blank, unqualified, and unrestrictive. 
C) special, unqualified, and restrictive. 
D) special, qualified, and unrestrictive. 
A) blank, qualified, and restrictive. 
B) blank, unqualified, and unrestrictive. 
C) special, unqualified, and restrictive. 
D) special, qualified, and unrestrictive.

Question 7

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 8

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

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is required regarding indorsements?

Accepted Answer

A) An indorsement must be written on the back side of the instrument. 
B) There must be compliance with Federal Reserve Board guidelines in order for the instrument to be negotiable. 
C) An indorsement must be written on the instrument or on a paper affixed to the instrument. 
D) An indorsement must be dated. 
A) An indorsement must be written on the back side of the instrument. 
B) There must be compliance with Federal Reserve Board guidelines in order for the instrument to be negotiable. 
C) An indorsement must be written on the instrument or on a paper affixed to the instrument. 
D) An indorsement must be dated.

Question 10

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 11

A person is never entitled to enforce an instrument if that person is not the owner of the instrument or if that person is in wrongful possession of the instrument.

Accepted Answer

A) True 
 B)False

Question 12

The "value" requirement of a holder in due course is the same as "consideration" for a contract.

Accepted Answer

A) True 
 B)False

Question 13

A holder in due course could recover from the maker where the:

Accepted Answer

A) maker's signature is forged. 
B) bearer instrument was stolen after it was completed. 
C) maker signed the instrument under physical duress. 
D) maker is a fifteen-year-old. 
A) maker's signature is forged. 
B) bearer instrument was stolen after it was completed. 
C) maker signed the instrument under physical duress. 
D) maker is a fifteen-year-old.

Question 14

The "impostor rule" is an exception to the general rule that negotiation of an order instrument requires a valid
indorsement by the person to whose order the instrument is payable.

Accepted Answer

A) True 
 B)False

Question 15

The customary manner of disclaiming the indorser's contractual liability is to add which of the following sets of words before or after his signature?

Accepted Answer

A) For collection only 
B) Without recourse 
C) Pay to the order of 
D) For deposit only 
A) For collection only 
B) Without recourse 
C) Pay to the order of 
D) For deposit only

Question 16

Which of the following is a special unqualified indorsement?

Accepted Answer

A) Pay to the order of John Doe, without recourse 
B) For deposit only, John Jones 
C) Without recourse, Sandra Adams 
D) Pay to the order of April Smith 
A) Pay to the order of John Doe, without recourse 
B) For deposit only, John Jones 
C) Without recourse, Sandra Adams 
D) Pay to the order of April Smith

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a restrictive indorsement?

Accepted Answer

A) "Without recourse" 
B) "For deposit" 
C) "Pay any bank" 
D) "For collection" 
A) "Without recourse" 
B) "For deposit" 
C) "Pay any bank" 
D) "For collection"

Question 19

Is the negotiation of an instrument ever valid even though the transaction in which it occurs is voidable or even void?
Explain.

Accepted Answer

Yes, the negotiation of an instrument is

Question 20

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.

Exam 27: Transfer and Holder in Due Course

A bank "gives value" when it allows a depositor to withdraw funds against a deposited item.

Cynthia Todd is the holder of a check with the indorsement "Adam Brock." To protect herself, Cynthia may:

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

Tony is fraudulently induced to issue a check to Rita.Tony has:

All of the following are "real defenses" except a:

Laura is in possession of a check which contains the following indorsement, "Sam Smith, without recourse, for collection only." The indorsement would be classified as:

A transfer of order paper:

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

Which of the following is required regarding indorsements?

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

A person is never entitled to enforce an instrument if that person is not the owner of the instrument or if that person is in wrongful possession of the instrument.

The "value" requirement of a holder in due course is the same as "consideration" for a contract.

A holder in due course could recover from the maker where the:

The "impostor rule" is an exception to the general rule that negotiation of an order instrument requires a valid indorsement by the person to whose order the instrument is payable.

The customary manner of disclaiming the indorser's contractual liability is to add which of the following sets of words before or after his signature?

Which of the following is a special unqualified indorsement?

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

Which of the following is not a restrictive indorsement?

Is the negotiation of an instrument ever valid even though the transaction in which it occurs is voidable or even void? Explain.

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

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

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

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

51: The Legal Environment Of Business

52: Contracts.

53: Agency.

54: Sales

55: Negotiable Instruments

56: Unincorporated Business Association

57: Corporations

58: Debtor and Creditor Relation

59: Regulation of Business

60: Property.