Question 1

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. A

Question 2

Cecilia made a check out to Gideon for $15.Gideon fraudulently changed the check to read $150,and cashed it at Corner Bank.Is Cecilia discharged from liability on the check?

Accepted Answer

A) Yes,Cecilia owes nothing on the check because alteration of a check is a real defense and real defenses are good even against holders in due course. 
B) No,Cecilia pays $150 because of the impostor rule. 
C) No,Cecilia pays $150 because she in not an indorser or accommodation party. 
D) Yes,Cecilia owes nothing unless Corner Bank is a holder in due course in which case she owes the original $15. 
A) Yes,Cecilia owes nothing on the check because alteration of a check is a real defense and real defenses are good even against holders in due course. 
B) No,Cecilia pays $150 because of the impostor rule. 
C) No,Cecilia pays $150 because she in not an indorser or accommodation party. 
D) Yes,Cecilia owes nothing unless Corner Bank is a holder in due course in which case she owes the original $15. D

Question 3

Commercial paper is a contract to pay money.

Accepted Answer

A) True 
 B)False  True

Question 4

Hammer bought a tool set from Weekend Projects,Inc.and signed a consumer credit contract promising to pay for the tool set in 12 monthly installments.Weekend promptly negotiated the instrument to its affiliate Easy Finance Co.in exchange for a discounted payment.Easy Finance gave value for the instrument,in good faith,and without knowledge of any defects or claims against the instrument.The tool set was defective and therefore Hammer stopped making the monthly payments.Easy Finance sues Hammer for the balance due on the instrument.Can Hammer raise this personal defense (breach of implied warranty of merchantability)against Easy Finance? Discuss.

Accepted Answer

Yes,Hammer can raise this personal defen

Question 5

Grace signed a check in the lower right-hand corner and Hannah signed on the back.The presumption is that:

Accepted Answer

A) Grace is the issuer. 
B) Grace is the acceptor. 
C) Hannah is the drawer. 
D) Hannah is the maker and Grace is an indorser. 
A) Grace is the issuer. 
B) Grace is the acceptor. 
C) Hannah is the drawer. 
D) Hannah is the maker and Grace is an indorser.

Question 6

Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.

Accepted Answer

Presentment warranties apply to someone

Question 7

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 8

John is a holder in due course of a check.John goes to the drawee bank,Last Chance Bank,to cash the check.What is the liability of Last Chance?

Accepted Answer

A) Last Chance Bank is primarily liable on the check. 
B) Last Chance Bank is not primarily liable on the check until it accepts the check. 
C) Last Chance Bank is secondarily liable on the check. 
D) Last Chance Bank is not secondarily liable on the check until it accepts the check. 
A) Last Chance Bank is primarily liable on the check. 
B) Last Chance Bank is not primarily liable on the check until it accepts the check. 
C) Last Chance Bank is secondarily liable on the check. 
D) Last Chance Bank is not secondarily liable on the check until it accepts the check.

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

There are three parties on a promise instrument:the maker,the drawee,and the payee.

Accepted Answer

A) True 
 B)False

Question 12

Nelson writes Leah a check for mowing his lawn.Leah deposits the check in her bank,but it is not paid by Nelson's bank.Leah calls Nelson to notify him that her bank returned his check to her unpaid.Leah's notice of the dishonor is insufficient;she must provide written notice.

Accepted Answer

A) True 
 B)False

Question 13

An indorser who writes "without recourse" above her signature on a negotiable instrument is not liable for payment.

Accepted Answer

A) True 
 B)False

Question 14

Kent Weston wrote a check for $500 payable to the order of Chester Jones.Chester indorsed the back of the check as follows:"Chester Jones." The check is now:

Accepted Answer

A) order paper. 
B) bearer paper. 
C) a cashier's check. 
D) special paper. 
A) order paper. 
B) bearer paper. 
C) a cashier's check. 
D) special paper.

Question 15

Charlene Brown has possession of a check made out to the order of Charlene Brown (herself)which she received in payment for writing a manuscript for her publisher.Charlene is a holder in due course and the publisher cannot claim any "real" defenses to payment.Charlene has an unconditional right to be paid for the check.

Accepted Answer

A) True 
 B)False

Question 16

Verne has possession of a draft that has been validly negotiated to him.His payment process necessarily includes:

Accepted Answer

A) presentment of the draft,dishonor,and notice of dishonor. 
B) exhibiting the instrument,showing reasonable identification,and surrendering the draft if it is paid in full. 
C) exhibiting the draft,providing a thumbprint signature,and giving a receipt. 
D) suspending the underlying debt,applying the shelter rule,and making a demand for payment. 
A) presentment of the draft,dishonor,and notice of dishonor. 
B) exhibiting the instrument,showing reasonable identification,and surrendering the draft if it is paid in full. 
C) exhibiting the draft,providing a thumbprint signature,and giving a receipt. 
D) suspending the underlying debt,applying the shelter rule,and making a demand for payment.

Question 17

A "holder" of order paper can be described as:

Accepted Answer

A) the payee. 
B) any person in possession of the instrument. 
C) any person in possession of the instrument if it is payable to or indorsed to him. 
D) the first party to come in contact with a negotiable instrument. 
A) the payee. 
B) any person in possession of the instrument. 
C) any person in possession of the instrument if it is payable to or indorsed to him. 
D) the first party to come in contact with a negotiable instrument.

Question 18

An instrument is negotiable if it satisfies six standards.Which of the following is a standard of negotiability?

Accepted Answer

A) The instrument can be oral provided there is proof beyond a reasonable doubt. 
B) The instrument must be payable on demand. 
C) The instrument must be conditional. 
D) The instrument must state a definite sum of money. 
A) The instrument can be oral provided there is proof beyond a reasonable doubt. 
B) The instrument must be payable on demand. 
C) The instrument must be conditional. 
D) The instrument must state a definite sum of money.

Question 19

A drawee has primarily liability on a draft.

Accepted Answer

A) True 
 B)False

Question 20

Mona co-signs a promissory note with her daughter Beth so Beth can purchase her first car.Mona will be discharged from her obligation on the note:

Accepted Answer

A) if Beth pays the obligation in full under the terms of the note. 
B) only if Mona pays half of the value of the note. 
C) when Beth turns 18. 
D) only if Mona dies before Beth's obligation is discharged. 
A) if Beth pays the obligation in full under the terms of the note. 
B) only if Mona pays half of the value of the note. 
C) when Beth turns 18. 
D) only if Mona dies before Beth's obligation is discharged.

Exam 22: Negotiable Instruments

The section of the UCC that governs negotiable instruments is:

Cecilia made a check out to Gideon for $15.Gideon fraudulently changed the check to read $150,and cashed it at Corner Bank.Is Cecilia discharged from liability on the check?

Commercial paper is a contract to pay money.

Grace signed a check in the lower right-hand corner and Hannah signed on the back.The presumption is that:

Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.

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:

John is a holder in due course of a check.John goes to the drawee bank,Last Chance Bank,to cash the check.What is the liability of Last Chance?

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?

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

There are three parties on a promise instrument:the maker,the drawee,and the payee.

Nelson writes Leah a check for mowing his lawn.Leah deposits the check in her bank,but it is not paid by Nelson's bank.Leah calls Nelson to notify him that her bank returned his check to her unpaid.Leah's notice of the dishonor is insufficient;she must provide written notice.

An indorser who writes "without recourse" above her signature on a negotiable instrument is not liable for payment.

Kent Weston wrote a check for $500 payable to the order of Chester Jones.Chester indorsed the back of the check as follows:"Chester Jones." The check is now:

Verne has possession of a draft that has been validly negotiated to him.His payment process necessarily includes:

A "holder" of order paper can be described as:

An instrument is negotiable if it satisfies six standards.Which of the following is a standard of negotiability?

A drawee has primarily liability on a draft.

Mona co-signs a promissory note with her daughter Beth so Beth can purchase her first car.Mona will be discharged from her obligation on the note:

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