Question 1

A bank that draws a check on itself has issued

Accepted Answer

A) a special indorsement. 
B) a claim in recoupment. 
C) a certificate of depsosit. 
D) a cashier's check. 
A) a special indorsement. 
B) a claim in recoupment. 
C) a certificate of depsosit. 
D) a cashier's check.

Question 2

Because negotiable instruments are more valuable than non-negotiable ones,it is importantfor buyers and sellers to be able to tell,easily and accurately,if an instrument is indeednegotiable.What six standards must an instrument meet in order for it to be negotiable?

Accepted Answer

In order for an instrument to be negotia

Question 3

In June,The Seascape Gallery sells an oil painting to Collegiate Systems,Inc.Collegiate promises to pay for the painting in three months.The gallery prepares a draft ordering Collegiate Systems to pay $3,000 to First Bank on September 15.Collegiate Systems signs the draft.The draft is a

Accepted Answer

A) sight draft. 
B) time draft. 
C) trade draft. 
D) future draft. 
A) sight draft. 
B) time draft. 
C) trade draft. 
D) future draft.

Question 4

Commercial paper is a contract to pay money.

Accepted Answer

A) True 
 B)False

Question 5

There are three parties on a promissory note: the maker,the drawee,and the payee.

Accepted Answer

A) True 
 B)False

Question 6

On March 1 Donna wrote a check for $296 to Sun Services.When will the check be overdue? What is the effect of the check's being overdue? What is the effect if the check is stamped "Insufficient Funds" by Donna's bank?

Accepted Answer

A check is overdue 90 days after its dat

Question 7

Under the UCC,a holder in due course is a holder who has given value for the instrument.Which of the following holders have given value for the instrument?

Accepted Answer

A) Beth promises to paint the neighbor's house in exchange for a promissory note as an advance payment for the job. 
B) Steve gives a note and mortgage on his house to his attorney as a retainer to handle his pending divorce. 
C) Todd, a newspaper carrier, accepts a properly indorsed two-party check for the past two months of deliveries. 
D) All of the above are correct. 
A) Beth promises to paint the neighbor's house in exchange for a promissory note as an advance payment for the job. 
B) Steve gives a note and mortgage on his house to his attorney as a retainer to handle his pending divorce. 
C) Todd, a newspaper carrier, accepts a properly indorsed two-party check for the past two months of deliveries. 
D) All of the above are correct.

Question 8

Sophie issues a promissory note made "payable to the order of Molly." Molly indorses the note by signing her name and gives the note to Dana.Which of the following is correct?

Accepted Answer

A) Sophie issued a bearer instrument and Molly kept it in bearer form. 
B) Sophie issued an order instrument, but Molly changed it to bearer form. 
C) Sophie issued an order instrument and Molly kept it in order form. 
D) Sophie issued a bearer instrument and Molly changed it to bearer form. 
A) Sophie issued a bearer instrument and Molly kept it in bearer form. 
B) Sophie issued an order instrument, but Molly changed it to bearer form. 
C) Sophie issued an order instrument and Molly kept it in order form. 
D) Sophie issued a bearer instrument and Molly changed it to bearer form.

Question 9

The evening news was full of stories about how Levine sold fraudulent negotiable instruments to investors around the country.Two days later,Brighty,who did not hear the news reports,bought some of the fraudulent negotiable instruments from a swindled investor.Can Brighty claim the position of a holder in due course considering the publicity of the scam?

Accepted Answer

A) Brighty is presumed to have knowledge of the scam and therefore did not purchase the instruments in good faith. 
B) Although Brighty passes the subjective test of good faith, he fails the objective test and therefore cannot claim to have purchased the instruments in good faith. 
C) Brighty can claim to have purchased the instruments in good faith if he subjectively believed the instruments were valid and if objectively his purchase of the instruments was commercially reasonable. 
D) Brightly cannot be a holder in due course because once an action of fraud is discovered, no additional claims against that party can be sought. 
A) Brighty is presumed to have knowledge of the scam and therefore did not purchase the instruments in good faith. 
B) Although Brighty passes the subjective test of good faith, he fails the objective test and therefore cannot claim to have purchased the instruments in good faith. 
C) Brighty can claim to have purchased the instruments in good faith if he subjectively believed the instruments were valid and if objectively his purchase of the instruments was commercially reasonable. 
D) Brightly cannot be a holder in due course because once an action of fraud is discovered, no additional claims against that party can be sought.

Question 10

A draft is always a check,but a check is not always a draft.

Accepted Answer

A) True 
 B)False

Question 11

There are two types of commercial paper: express and implied.

Accepted Answer

A) True 
 B)False

Question 12

The section of the UCC that governs negotiable instruments is

Accepted Answer

A) Article 3. 
B) Article 2. 
C) Article 6. 
D) Article 9. 
A) Article 3. 
B) Article 2. 
C) Article 6. 
D) Article 9.

Question 13

A claim in recoupment can be used against a holder in due course.

Accepted Answer

A) True 
 B)False

Question 14

Francenie has a checking account at Corner Bank.She wants tickets to an upcoming concert.She writes a check to Ticketmaster for the cost of two tickets.In this scenario:

Accepted Answer

A) Francenie is the drawee, Corner Bank is the drawer, and Ticketmaster is the payee. 
B) Francenie is the maker, Corner Bank is the drawee, and Ticketmaster is the payee. 
C) Francenie is the drawer, Corner Bank is the drawee, and Ticketmaster is the payee. 
D) Francenie is the payee, Corner Bank is the drawer, and Ticketmaster is the maker. 
A) Francenie is the drawee, Corner Bank is the drawer, and Ticketmaster is the payee. 
B) Francenie is the maker, Corner Bank is the drawee, and Ticketmaster is the payee. 
C) Francenie is the drawer, Corner Bank is the drawee, and Ticketmaster is the payee. 
D) Francenie is the payee, Corner Bank is the drawer, and Ticketmaster is the maker.

Question 15

Valley National Bank issued a note promising to repay an investor on October 1,2011,three years from the date of issue,plus interest.The note

Accepted Answer

A) is a certificate of deposit, and it will pay a lower rate of interest than a regular savings account at Valley. 
B) is a certificate of deposit, and it will pay a higher rate of interest than a regular savings account at Valley. 
C) is a certificate of deposit, and whether the bank pays a higher or lower rate of interest than it pays on its regular savings accounts depends upon particular bank policy. 
D) constitutes a trade acceptance. 
A) is a certificate of deposit, and it will pay a lower rate of interest than a regular savings account at Valley. 
B) is a certificate of deposit, and it will pay a higher rate of interest than a regular savings account at Valley. 
C) is a certificate of deposit, and whether the bank pays a higher or lower rate of interest than it pays on its regular savings accounts depends upon particular bank policy. 
D) constitutes a trade acceptance.

Question 16

Matt wrote a $500 check to Alistar for some yard work that Alistar had done.What will Alistar have to do negotiate this instrument to Totally Tough,Inc.in payment for some yard equipment Alistar had bought?

Accepted Answer

A check is order paper.To nego

Question 17

The term "issuer"

Accepted Answer

A) is not used in relation to commercial paper. 
B) is an all-purpose term that means both maker and drawer. 
C) is synonymous with drawee. 
D) is used in relation to commercial paper only to indicate the bank which creates a certificate of deposit. 
A) is not used in relation to commercial paper. 
B) is an all-purpose term that means both maker and drawer. 
C) is synonymous with drawee. 
D) is used in relation to commercial paper only to indicate the bank which creates a certificate of deposit.

Question 18

Personal and real defenses are valid against an ordinary holder,only real defenses can be used against a holder in due course.

Accepted Answer

A) True 
 B)False

Question 19

To be negotiable,a check must be in writing.Under the UCC,a check

Accepted Answer

A) must be written on standard size paper of 6" × 2.5." 
B) must be written on an official bank form. 
C) need not be on any official form or even on paper. 
D) must be written on a pre-printed bank issued check. 
A) must be written on standard size paper of 6" × 2.5." 
B) must be written on an official bank form. 
C) need not be on any official form or even on paper. 
D) must be written on a pre-printed bank issued check.

Question 20

A possessor of non-negotiable commercial paper has the same rights as the person who made the original contract.

Accepted Answer

A) True 
 B)False

Exam 25: Creating a Negotiable Instrument

A bank that draws a check on itself has issued

Because negotiable instruments are more valuable than non-negotiable ones,it is importantfor buyers and sellers to be able to tell,easily and accurately,if an instrument is indeednegotiable.What six standards must an instrument meet in order for it to be negotiable?

In June,The Seascape Gallery sells an oil painting to Collegiate Systems,Inc.Collegiate promises to pay for the painting in three months.The gallery prepares a draft ordering Collegiate Systems to pay $3,000 to First Bank on September 15.Collegiate Systems signs the draft.The draft is a

Commercial paper is a contract to pay money.

There are three parties on a promissory note: the maker,the drawee,and the payee.

On March 1 Donna wrote a check for $296 to Sun Services.When will the check be overdue? What is the effect of the check's being overdue? What is the effect if the check is stamped "Insufficient Funds" by Donna's bank?

Under the UCC,a holder in due course is a holder who has given value for the instrument.Which of the following holders have given value for the instrument?

Sophie issues a promissory note made "payable to the order of Molly." Molly indorses the note by signing her name and gives the note to Dana.Which of the following is correct?

A draft is always a check,but a check is not always a draft.

There are two types of commercial paper: express and implied.

The section of the UCC that governs negotiable instruments is

A claim in recoupment can be used against a holder in due course.

Francenie has a checking account at Corner Bank.She wants tickets to an upcoming concert.She writes a check to Ticketmaster for the cost of two tickets.In this scenario:

Valley National Bank issued a note promising to repay an investor on October 1,2011,three years from the date of issue,plus interest.The note

Matt wrote a $500 check to Alistar for some yard work that Alistar had done.What will Alistar have to do negotiate this instrument to Totally Tough,Inc.in payment for some yard equipment Alistar had bought?

The term "issuer"

Personal and real defenses are valid against an ordinary holder,only real defenses can be used against a holder in due course.

To be negotiable,a check must be in writing.Under the UCC,a check

A possessor of non-negotiable commercial paper has the same rights as the person who made the original contract.

Introduction to Law

Business Ethics and Corporate Social Responsibility

International Law

Common Law, Statutory Law, and Administrative Law

Constitutional Law

Dispute Resolution

Crime

Intentional Torts and Business Torts

Negligence, Strict Liability, and Product Liability

Cyberlaw and Privacy

Introduction to Contracts

Agreement

Consideration

Legality

Capacity and Consent

Written Contracts

Third Parties

Performance, Breach and Discharge

Remedies

Practical Contracts

Introduction to Sales

Ownership, Risk and Warranties

Performance and Remedies

Secured Transactions

Liability for Negotiable Instruments

Accountants' Liability

Agency Law

Employment and Labor Law

Employment Discrimination

Starting a Business: LLCs and Other Options

Partnerships

Life and Death of a Corporation

Management Duties

Shareholder Rights

Bankruptcy

Securities Regulation

Antitrust

Consumer Protection

Environmental Law

Intellectual Property

Real Property and Landlord Tenant

Personal Property and Bailment

Planning for the Future: Estates and Insurance

Filters