Question 1

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is​

Accepted Answer

A)  ​a blank indorsement. 
B)  ​a qualified indorsement. 
C)  ​a restrictive indorsement. 
D)  ​a special indorsement. 
A)  ​a blank indorsement. 
B)  ​a qualified indorsement. 
C)  ​a restrictive indorsement. 
D)  ​a special indorsement. A

Question 2

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is​

Accepted Answer

A)  ​a knowledgeable holder in due course. 
B)  ​an ordinary holder. 
C)  ​an ordinary holder in due course. 
D)  ​an ordinary note taker. 
A)  ​a knowledgeable holder in due course. 
B)  ​an ordinary holder. 
C)  ​an ordinary holder in due course. 
D)  ​an ordinary note taker. B

Question 3

Entrepreneur LLC owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security​

Accepted Answer

A)  ​does not constitute sufficient consideration for HDC status. 
B)  ​does not satisfy the value requirement for HDC status. 
C)  ​satisfies the consideration requirement for HDC status. 
D)  ​satisfies the value requirement for HDC status. 
A)  ​does not constitute sufficient consideration for HDC status. 
B)  ​does not satisfy the value requirement for HDC status. 
C)  ​satisfies the consideration requirement for HDC status. 
D)  ​satisfies the value requirement for HDC status. D

Question 4

An instrument payable to two or more persons in the alternative requires the indorsement of both payees for negotiation.

Accepted Answer

A) True 
 B)False

Question 5

Doyle gives a check to eMarket Finance to buy 100 shares of stock in FabNu Corporation for Doyle. The price of the shares is constantly fluctuating. eMarket asks Doyle to leave the amount of the check blank and allow it to fill in the price when making the purchase. Doyle agrees. eMarket buys the stock when the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment for a $5,000 debt to Guido & Hollis Accountants (G&H), which takes the check in good faith and without notice of eMarket's act. G&H later learns that eMarket was not authorized to fill in the check for $1,000 over the price. Is G&H an HDC? If so, for how much?

Accepted Answer

G&H is an HDC to the extent of $5,000, t

Question 6

Secure Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Secure Loan takes it​

Accepted Answer

A)  ​an unreasonable time after its due date. 
B)  ​before its due date. 
C)  ​on its due date. 
D)  ​without noticing its due date. 
A)  ​an unreasonable time after its due date. 
B)  ​before its due date. 
C)  ​on its due date. 
D)  ​without noticing its due date.

Question 7

An instrument is defective if it is overdue.

Accepted Answer

A) True 
 B)False

Question 8

An instrument is defective if it has been previously dishonored.

Accepted Answer

A) True 
 B)False

Question 9

Usually, indorsements are qualified indorsements.

Accepted Answer

A) True 
 B)False

Question 10

Often, whether a holder will be able to obtain payment on an instrument will depend on whether he or she is a holder in due course.

Accepted Answer

A) True 
 B)False

Question 11

Under the UCC, a transfer of rights under a contract is a negotiation.

Accepted Answer

A) True 
 B)False

Question 12

An instrument can only be transferred by negotiation.

Accepted Answer

A) True 
 B)False

Question 13

Fact Pattern 26-1
Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature.
-Refer to Fact Pattern 26-1. After Patricia writes "Pay to Patricia" above Nina's signature, further negotiation of the check​

Accepted Answer

A)  ​requires Nina's re-indorsement and delivery. 
B)  ​requires delivery alone. 
C)  ​requires Patricia's indorsement and delivery. 
D)  ​is not possible. 
A)  ​requires Nina's re-indorsement and delivery. 
B)  ​requires delivery alone. 
C)  ​requires Patricia's indorsement and delivery. 
D)  ​is not possible.

Question 14

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is​

Accepted Answer

A)  ​an HDC, because he promised to perform services at a future date. 
B)  ​an HDC, because the transferor was the original payee on the note. 
C)  ​not an HDC, because he did not acquire the instrument in good faith. 
D)  ​not an HDC, because he did not yet give value for the instrument. 
A)  ​an HDC, because he promised to perform services at a future date. 
B)  ​an HDC, because the transferor was the original payee on the note. 
C)  ​not an HDC, because he did not acquire the instrument in good faith. 
D)  ​not an HDC, because he did not yet give value for the instrument.

Question 15

A holder takes an instrument for value if he or she inherits an instrument.

Accepted Answer

A) True 
 B)False

Question 16

Fact Pattern 26-1
Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature.
-Refer to Fact Pattern 26-A1. When Patricia writes "Pay to Patricia" above Nina's signature, the check becomes​

Accepted Answer

A)  ​a bearer instrument. 
B)  ​an order instrument. 
C)  ​a promissory note. 
D)  ​a stolen instrument. 
A)  ​a bearer instrument. 
B)  ​an order instrument. 
C)  ​a promissory note. 
D)  ​a stolen instrument.

Question 17

A transfer by assignment can make it possible for a transferee to receive more rights in the instrument than the prior possessor had.

Accepted Answer

A) True 
 B)False

Question 18

Rod negotiates a bearer instrument to Shauna by​

Accepted Answer

A)  ​delivery with an assignment of its rights under a contract. 
B)  ​delivery with any necessary indorsement. 
C)  ​delivery alone. 
D)  ​presenting it in response to a demand by Shauna. 
A)  ​delivery with an assignment of its rights under a contract. 
B)  ​delivery with any necessary indorsement. 
C)  ​delivery alone. 
D)  ​presenting it in response to a demand by Shauna.

Question 19

Raul wants to transfer a check to Schmidt. The check is defective if it​

Accepted Answer

A)  ​has been previously dishonored. 
B)  ​contains handwritten terms. 
C)  ​is undated, antedated, or postdated. 
D)  ​all of the choices. 
A)  ​has been previously dishonored. 
B)  ​contains handwritten terms. 
C)  ​is undated, antedated, or postdated. 
D)  ​all of the choices.

Question 20

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she​

Accepted Answer

A)  ​acquires possession of the negotiable instrument. 
B)  ​agrees with Ellen to buy the negotiable instrument. 
C)  ​pays the face value due on the instrument. 
D)  ​transfers the instrument to another party. 
A)  ​acquires possession of the negotiable instrument. 
B)  ​agrees with Ellen to buy the negotiable instrument. 
C)  ​pays the face value due on the instrument. 
D)  ​transfers the instrument to another party.

Exam 26: Transferability and Holder in Due Course

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is​

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is​

Entrepreneur LLC owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security​

An instrument payable to two or more persons in the alternative requires the indorsement of both payees for negotiation.

Secure Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Secure Loan takes it​

An instrument is defective if it is overdue.

An instrument is defective if it has been previously dishonored.

Usually, indorsements are qualified indorsements.

Often, whether a holder will be able to obtain payment on an instrument will depend on whether he or she is a holder in due course.

Under the UCC, a transfer of rights under a contract is a negotiation.

An instrument can only be transferred by negotiation.

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is​

A holder takes an instrument for value if he or she inherits an instrument.

Fact Pattern 26-1 Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature. -Refer to Fact Pattern 26-A1. When Patricia writes "Pay to Patricia" above Nina's signature, the check becomes​

A transfer by assignment can make it possible for a transferee to receive more rights in the instrument than the prior possessor had.

Rod negotiates a bearer instrument to Shauna by​

Raul wants to transfer a check to Schmidt. The check is defective if it​

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she​

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Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is

Entrepreneur LLC owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security

Secure Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Secure Loan takes it

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

Fact Pattern 26-1 Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature. -Refer to Fact Pattern 26-A1. When Patricia writes "Pay to Patricia" above Nina's signature, the check becomes

Rod negotiates a bearer instrument to Shauna by

Raul wants to transfer a check to Schmidt. The check is defective if it

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she