Question 1

The two types of indorsements are blanket or partial.

Accepted Answer

A) True 
 B)False

Question 2

Federal Reserve Board guidelines for checks:

Accepted Answer

A)  require indorsements to be in blue or black ink. 
B)  must be followed or the check will not go through the banking system. 
C)  require bank indorsements to be made within 2 inches of the left edge of the back of the check. 
D)  require indorsements to be in cursive handwriting. 
A)  require indorsements to be in blue or black ink. 
B)  must be followed or the check will not go through the banking system. 
C)  require bank indorsements to be made within 2 inches of the left edge of the back of the check. 
D)  require indorsements to be in cursive handwriting.

Question 3

To acquire the preferential rights of a holder in due course, a person either must meet the requirements of the UCC or must inherit the rights under the shelter rule.

Accepted Answer

A) True 
 B)False

Question 4

Sharp Finance Company has furnished Keith with some pre-printed forms for customers to sign to finance repairs on their homes. After the customers sign the notes naming Keith as the payee, he sells them to Sharp Finance. Sometimes Keith is busy and does a poor job on the homes so he can get on to the next job. When customers complain, he says he'll get around to fixing the problems. If the customers don't pay the note, Sharp Finance sues them. Can the customers use the defenses they have against Keith against Sharp? Explain.

Accepted Answer

Yes, they can use the defenses they have

Question 5

A negotiation to transfer an instrument can be effective even if it is  obtained by fraud, duress, or mistake.

Accepted Answer

A) True 
 B)False

Question 6

Whether a transfer is by assignment or by negotiation, the transferee does not acquire the rights the transferor had.

Accepted Answer

A) True 
 B)False

Question 7

Kripps, who is a holder in due course, buys a note made by Aldridge, who is under bankruptcy protection, to Huron Motors. Even though Aldridge's debt was discharged through bankruptcy, Kripps can collect on the note.

Accepted Answer

A) True 
 B)False

Question 8

Michael issues a check to Paula. She negotiates the check to Hal as payment for a used television set. Hal has no notice of any claims or defenses and takes the check in good faith. Hal indorses the check and gives it to his son as a birthday present. Is Hal's son a holder in due course? What rights does he have with respect to the check? If Michael has a defense of fraud in the inducement against Paula, can he use that defense against Hal or Hal's son?

Accepted Answer

Hal's son is not a holder in due course

Question 9

Opal had a check for $294 made out to her. She indorsed it with her name and gave it to Daryl who, in return, agreed to paint her living room the next Saturday. In this case:

Accepted Answer

A)  the check is not negotiable. 
B)  Daryl is not a holder. 
C)  Daryl is not a holder in due course. 
D)  Daryl has given value for the check. 
A)  the check is not negotiable. 
B)  Daryl is not a holder. 
C)  Daryl is not a holder in due course. 
D)  Daryl has given value for the check.

Question 10

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 11

"Order paper" is negotiated by delivery only.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A holder need not actually have the instrument in his possession.

Accepted Answer

A) True 
 B)False

Question 14

The case, State of Qatar v. First American Bank of Virginia , held that:

Accepted Answer

A)  the phrase "for deposit only" is not an effective restrictive indorsement. 
B)  depositary banks are not required to handle checks consistent with the restrictive indorsement. 
C)  the phrase "for deposit only" effectively limits the depositary bank to handle the instrument in a manner consistent with the transaction. 
D)  a stolen check which is indorsed in blank cannot be freely negotiated by the bearer. 
A)  the phrase "for deposit only" is not an effective restrictive indorsement. 
B)  depositary banks are not required to handle checks consistent with the restrictive indorsement. 
C)  the phrase "for deposit only" effectively limits the depositary bank to handle the instrument in a manner consistent with the transaction. 
D)  a stolen check which is indorsed in blank cannot be freely negotiated by the bearer.

Question 15

A restrictive indorsement:

Accepted Answer

A)  disclaims contract liability. 
B)  removes warranty liability. 
C)  attempts to restrict the rights of the indorsee in some fashion. 
D)  always destroys negotiability. 
A)  disclaims contract liability. 
B)  removes warranty liability. 
C)  attempts to restrict the rights of the indorsee in some fashion. 
D)  always destroys negotiability.

Question 16

Personal defenses include all but:

Accepted Answer

A)  lack of consideration. 
B)  minority of the maker. 
C)  fraud in the inducement. 
D)  breach of contract. 
A)  lack of consideration. 
B)  minority of the maker. 
C)  fraud in the inducement. 
D)  breach of contract.

Question 17

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 18

A qualified indorsement destroys negotiability.

Accepted Answer

A) True 
 B)False

Question 19

If the issuer and the person paying an instrument subject to the impostor rule are both negligent, comparative negligence would apply.

Accepted Answer

A) True 
 B)False

Question 20

A "without recourse" indorsement eliminates all of an indorser's liability.

Accepted Answer

A) True 
 B)False

Exam 25: Transfer and Holder in Due Course

The two types of indorsements are blanket or partial.

Federal Reserve Board guidelines for checks:

To acquire the preferential rights of a holder in due course, a person either must meet the requirements of the UCC or must inherit the rights under the shelter rule.

A negotiation to transfer an instrument can be effective even if it is obtained by fraud, duress, or mistake.

Whether a transfer is by assignment or by negotiation, the transferee does not acquire the rights the transferor had.

Kripps, who is a holder in due course, buys a note made by Aldridge, who is under bankruptcy protection, to Huron Motors. Even though Aldridge's debt was discharged through bankruptcy, Kripps can collect on the note.

Opal had a check for $294 made out to her. She indorsed it with her name and gave it to Daryl who, in return, agreed to paint her living room the next Saturday. In this case:

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?

"Order paper" is negotiated by delivery only.

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

A holder need not actually have the instrument in his possession.

The case, State of Qatar v. First American Bank of Virginia , held that:

A restrictive indorsement:

Personal defenses include all but:

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

A qualified indorsement destroys negotiability.

If the issuer and the person paying an instrument subject to the impostor rule are both negligent, comparative negligence would apply.

A "without recourse" indorsement eliminates all of an indorser's liability.

Introduction to Law

Business Ethics

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

Introduction to Sales and Leases

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Transfer of Title and Risk of Loss

Product Liability Warranties and Strict Liability

Sales Remedies

Form and Content

Liability of Parties

Bank Deposits Collections and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

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Accountants Legal Liability

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International Business Law

Introduction to Property Property Insurance Bailments and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

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