Question 1

A(n)________ is an indorsement that states that it is for the benefit or use of the indorser or another person.

Accepted Answer

A) indorsement in trust 
B) indorsement for deposit 
C) indorsement prohibiting further indorsement 
D) indorsement for collection 
A) indorsement in trust 
B) indorsement for deposit 
C) indorsement prohibiting further indorsement 
D) indorsement for collection

Question 2

Which of the following would constitute the creation of an assignment?

Accepted Answer

A) the transfer is of nonnegotiable instruments 
B) a transfer qualifies as a negotiation under Article 3 
C) a transferee qualifies as a holder in due course 
D) the indorsement falls under the shelter principle 
A) the transfer is of nonnegotiable instruments 
B) a transfer qualifies as a negotiation under Article 3 
C) a transferee qualifies as a holder in due course 
D) the indorsement falls under the shelter principle

Question 3

The allonge must be affixed to an instrument to be valid.

Accepted Answer

A) True 
 B)False

Question 4

A holder in due course is subject to all the claims and defenses that can be asserted against the transferor.

Accepted Answer

A) True 
 B)False

Question 5

An order paper that is indorsed in blank becomes bearer paper.

Accepted Answer

A) True 
 B)False

Question 6

Explain the requirement for a holder in due course (HD
C)under the Uniform Commercial Code (UC
C)that there be no evidence of forgery, alteration, or irregularity with respect to a negotiable instrument.

Accepted Answer

The UCC has a no evidence of forgery,alt

Question 7

An indorsement that does not specify a particular indorsee is known as a ________.

Accepted Answer

A) blank indorsement 
B) special indorsement 
C) qualified indorsement 
D) restrictive indorsement 
A) blank indorsement 
B) special indorsement 
C) qualified indorsement 
D) restrictive indorsement

Question 8

An indorsement with just the indorsee's signature on it,and a specific payee,would be an example of a nonrestrictive indorsement.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true of a qualified indorsement?

Accepted Answer

A) An instrument containing a qualified indorsement can only be negotiated once. 
B) An indorsement once qualified will protect all subsequent indorsers. 
C) A qualified indorsement protects only the indorser who wrote the indorsement. 
D) A qualified indorsement obligates the indorser to pay in case the maker defaults. 
A) An instrument containing a qualified indorsement can only be negotiated once. 
B) An indorsement once qualified will protect all subsequent indorsers. 
C) A qualified indorsement protects only the indorser who wrote the indorsement. 
D) A qualified indorsement obligates the indorser to pay in case the maker defaults.

Question 10

A separate piece of paper attached to an instrument on which an indorsement is written is known as a(n)________.

Accepted Answer

A) bill of exchange 
B) allonge 
C) supplement 
D) appendage 
A) bill of exchange 
B) allonge 
C) supplement 
D) appendage

Question 11

Value has been given by the holder if he or she acquires a security interest in or lien on an instrument.

Accepted Answer

A) True 
 B)False

Question 12

What are qualified indorsements?

Accepted Answer

The Uniform Commercial Code (UCC)permits

Question 13

For an order paper to be negotiated there must be delivery and indorsement.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true of an allonge?

Accepted Answer

A) It must contain the name of the payee to be valid. 
B) It must be accepted by the payee to be valid. 
C) It must be affixed to the indorsement. 
D) It must be provided only on demand. 
A) It must contain the name of the payee to be valid. 
B) It must be accepted by the payee to be valid. 
C) It must be affixed to the indorsement. 
D) It must be provided only on demand.

Question 15

Which of the following requirements has to be met for a holder to qualify as a holder in due course (HDC)under the shelter principle?

Accepted Answer

A) The holder must not be in possession of a prior negotiable instrument. 
B) The holder must have notice of a defense or claim against the payment of the instrument. 
C) The holder must have been a party to a fraud or an illegality affecting the instrument. 
D) The holder must have acquired the instrument from an HDC. 
A) The holder must not be in possession of a prior negotiable instrument. 
B) The holder must have notice of a defense or claim against the payment of the instrument. 
C) The holder must have been a party to a fraud or an illegality affecting the instrument. 
D) The holder must have acquired the instrument from an HDC.

Question 16

A specially qualified indorsement can only be negotiated by indorsement and delivery.

Accepted Answer

A) True 
 B)False

Question 17

An indorser is allowed to indorse an instrument so as to make the indorsee his collecting agent.

Accepted Answer

A) True 
 B)False

Question 18

An indorsement that purports to prohibit further negotiation of an instrument does not destroy the negotiability.

Accepted Answer

A) True 
 B)False

Question 19

To qualify as an HDC,a person must be the holder of a negotiable instrument that was taken for value.

Accepted Answer

A) True 
 B)False

Question 20

The transfer of rights under a nonnegotiable contract is known as a(n)________.

Accepted Answer

A) assignment 
B) negotiation 
C) indorsement 
D) dishonored instrument 
A) assignment 
B) negotiation 
C) indorsement 
D) dishonored instrument

Exam 23: Holder in Due Course and Transferability

A(n)________ is an indorsement that states that it is for the benefit or use of the indorser or another person.

Which of the following would constitute the creation of an assignment?

The allonge must be affixed to an instrument to be valid.

A holder in due course is subject to all the claims and defenses that can be asserted against the transferor.

An order paper that is indorsed in blank becomes bearer paper.

Explain the requirement for a holder in due course (HD C)under the Uniform Commercial Code (UC C)that there be no evidence of forgery, alteration, or irregularity with respect to a negotiable instrument.

An indorsement that does not specify a particular indorsee is known as a ________.

An indorsement with just the indorsee's signature on it,and a specific payee,would be an example of a nonrestrictive indorsement.

Which of the following is true of a qualified indorsement?

A separate piece of paper attached to an instrument on which an indorsement is written is known as a(n)________.

Value has been given by the holder if he or she acquires a security interest in or lien on an instrument.

What are qualified indorsements?

For an order paper to be negotiated there must be delivery and indorsement.

Which of the following is true of an allonge?

Which of the following requirements has to be met for a holder to qualify as a holder in due course (HDC)under the shelter principle?

A specially qualified indorsement can only be negotiated by indorsement and delivery.

An indorser is allowed to indorse an instrument so as to make the indorsee his collecting agent.

An indorsement that purports to prohibit further negotiation of an instrument does not destroy the negotiability.

To qualify as an HDC,a person must be the holder of a negotiable instrument that was taken for value.

The transfer of rights under a nonnegotiable contract is known as a(n)________.

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