Question 1

An indorsement stating "Pay Paula Hobson only":

Accepted Answer

A) is designed to restrict the rights of the indorser. 
B) is given the same effect as an unrestrictive indorsement. 
C) will, under the Code, be effective to prohibit further transfer beyond Paula Hobson. 
D) is labeled a "qualified indorsement," and it destroys negotiability. 
A) is designed to restrict the rights of the indorser. 
B) is given the same effect as an unrestrictive indorsement. 
C) will, under the Code, be effective to prohibit further transfer beyond Paula Hobson. 
D) is labeled a "qualified indorsement," and it destroys negotiability.

Question 2

A blank indorsement converts order paper to bearer paper and leaves bearer paper as bearer paper.

Accepted Answer

A) True 
 B)False

Question 3

Time paper that states it is due on July 1, a Sunday, is overdue on:

Accepted Answer

A) July 1. 
B) July 2. 
C) July 3. 
D) It depends on when the instrument is presented for payment. 
A) July 1. 
B) July 2. 
C) July 3. 
D) It depends on when the instrument is presented for payment.

Question 4

Both negotiable instruments and nonnegotiable undertakings are transferable by assignment and can result in the
transferee's becoming a holder.

Accepted Answer

A) True 
 B)False

Question 5

A holder in due course would have the right to collect from the original maker of an instrument even if the maker had a valid personal defense.

Accepted Answer

A) True 
 B)False

Question 6

Under Article 3, the employer is allowed to recover from its bank, despite the applicability of the fictitious payee rule, if the bank failed to exercise ordinary care in paying the instrument.

Accepted Answer

A) True 
 B)False

Question 7

If there is no indorsee designated on an indorsement bearing only the indorser's signature, it is a(n):

Accepted Answer

A) qualified indorsement. 
B) conditional indorsement. 
C) blank indorsement. 
D) allonge. 
A) qualified indorsement. 
B) conditional indorsement. 
C) blank indorsement. 
D) allonge.

Question 8

Delivery alone is insufficient to negotiate an instrument when it is payable to:

Accepted Answer

A) order and the last indorsement is in blank. 
B) cash and signed by the drawer. 
C) bearer and is not indorsed. 
D) the order of John Jones and is not indorsed. 
A) order and the last indorsement is in blank. 
B) cash and signed by the drawer. 
C) bearer and is not indorsed. 
D) the order of John Jones and is not indorsed.

Question 9

A holder in due course has the same rights under a consumer credit contract as under the UCC as long as a special notice requirement has been met.

Accepted Answer

A) True 
 B)False

Question 10

A payee may be a holder in due course under the Code.

Accepted Answer

A) True 
 B)False

Question 11

What is the effect of an alteration on a negotiable instrument? Does it make a difference whether the alteration was made fraudulently?

Accepted Answer

An alteration is an unauthorized change

Question 12

A "holder" may transfer the instrument, negotiate it, enforce payment of it subject to valid claims and defenses, and with some exceptions discharge it.

Accepted Answer

A) True 
 B)False

Question 13

A bearer instrument is comparable to cash in that it is negotiated by mere possession.

Accepted Answer

A) True 
 B)False

Question 14

What are the requirements for a transferee of a negotiable instrument to be a holder in due course?

Accepted Answer

To satisfy the requirements of UCC Secti

Question 15

The fictitious payee rule is based on the idea that employers should bear the risk of their own unscrupulous employees.

Accepted Answer

A) True 
 B)False

Question 16

The transfer of a nonnegotiable promise or order operates as an assignment.

Accepted Answer

A) True 
 B)False

Question 17

The shelter rule applies even if the transferee was a party to fraud or illegality affecting the instrument.

Accepted Answer

A) True 
 B)False

Question 18

An executory promise is the giving of value to support holder in due course status.

Accepted Answer

A) True 
 B)False

Question 19

Erin stole a paycheck from Carl prior to his indorsing it.She then forged Carl's signature and transferred the check to a gas station which took it in good faith, for value, without notice, and without reason to question its authenticity.The gas station:

Accepted Answer

A) was a holder in due course. 
B) could not be a holder. 
C) could be a holder, but not a holder in due course. 
D) can collect the amount of the check only from the drawer since Carl did not indorse it. 
A) was a holder in due course. 
B) could not be a holder. 
C) could be a holder, but not a holder in due course. 
D) can collect the amount of the check only from the drawer since Carl did not indorse it.

Question 20

Under the shelter rule, a person who is not a holder in due course can obtain the rights of a holder in due course.

Accepted Answer

A) True 
 B)False

Exam 27: Transfer and Holder in Due Course

An indorsement stating "Pay Paula Hobson only":

A blank indorsement converts order paper to bearer paper and leaves bearer paper as bearer paper.

Time paper that states it is due on July 1, a Sunday, is overdue on:

Both negotiable instruments and nonnegotiable undertakings are transferable by assignment and can result in the transferee's becoming a holder.

A holder in due course would have the right to collect from the original maker of an instrument even if the maker had a valid personal defense.

Under Article 3, the employer is allowed to recover from its bank, despite the applicability of the fictitious payee rule, if the bank failed to exercise ordinary care in paying the instrument.

If there is no indorsee designated on an indorsement bearing only the indorser's signature, it is a(n):

Delivery alone is insufficient to negotiate an instrument when it is payable to:

A holder in due course has the same rights under a consumer credit contract as under the UCC as long as a special notice requirement has been met.

A payee may be a holder in due course under the Code.

What is the effect of an alteration on a negotiable instrument? Does it make a difference whether the alteration was made fraudulently?

A "holder" may transfer the instrument, negotiate it, enforce payment of it subject to valid claims and defenses, and with some exceptions discharge it.

A bearer instrument is comparable to cash in that it is negotiated by mere possession.

What are the requirements for a transferee of a negotiable instrument to be a holder in due course?

The fictitious payee rule is based on the idea that employers should bear the risk of their own unscrupulous employees.

The transfer of a nonnegotiable promise or order operates as an assignment.

The shelter rule applies even if the transferee was a party to fraud or illegality affecting the instrument.

An executory promise is the giving of value to support holder in due course status.

Erin stole a paycheck from Carl prior to his indorsing it.She then forged Carl's signature and transferred the check to a gas station which took it in good faith, for value, without notice, and without reason to question its authenticity.The gas station:

Under the shelter rule, a person who is not a holder in due course can obtain the rights of a holder in due course.

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.