Question 1

A signature in the lower-right corner of a promissory note indicates that the signer is the maker of the note.

Accepted Answer

A) True 
 B)False  True

Question 2

Marks used in lieu of a written signature cannot be used for indorsements.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following actions by a holder constitutes the complete cancellation of a negotiable instrument?

Accepted Answer

A) intentionally destroying the negotiable instrument to eliminate obligation 
B) deliberately striking out the signature of an indorser 
C) releasing an obligor from liability 
D) surrendering collateral without the consent of the parties who would benefit from it 
A) intentionally destroying the negotiable instrument to eliminate obligation 
B) deliberately striking out the signature of an indorser 
C) releasing an obligor from liability 
D) surrendering collateral without the consent of the parties who would benefit from it A

Question 4

The Federal Trade Commission (FTC)holder in due course (HDC)rule applies when a buyer ________.

Accepted Answer

A)  signs a sales contract that includes a check 
B)  signs a sales contract that includes a promissory note 
C)  signs an installment sales contract that does not contain a waiver of defenses clause 
D)  arranges financing with a third-party lender 
A)  signs a sales contract that includes a check 
B)  signs a sales contract that includes a promissory note 
C)  signs an installment sales contract that does not contain a waiver of defenses clause 
D)  arranges financing with a third-party lender

Question 5

What is a transfer of an instrument?

Accepted Answer

A) issuance of the instrument 
B) presentment of the instrument for payment 
C) passage of the instrument other than issuance and presentment 
D) cancellation of the instrument 
A) issuance of the instrument 
B) presentment of the instrument for payment 
C) passage of the instrument other than issuance and presentment 
D) cancellation of the instrument

Question 6

A presentment is a demand for the acceptance of a dishonored instrument.

Accepted Answer

A) True 
 B)False

Question 7

A ________ defense is a type of defense that can be raised against both holders and HDCs.

Accepted Answer

A) universal 
B) personal 
C) fraud in the inducement 
D) breach of contract 
A) universal 
B) personal 
C) fraud in the inducement 
D) breach of contract

Question 8

Transfer warranties cannot be disclaimed if the indorsement states "without recourse."

Accepted Answer

A) True 
 B)False

Question 9

List the presentment warranties related to negotiable instruments.

Accepted Answer

Any person who presents a draft or check

Question 10

The payee of a cashier's check is also primarily liable on the instrument.

Accepted Answer

A) True 
 B)False

Question 11

Jeane signs a promissory note to pay $5,000 to Naresh.Naresh negotiates the instrument and indorses it to Dolph.Dolph changes the payment amount to $50,000 and negotiates the note to Nicholas.Nicholas indorses the note and negotiates it to Mack.Nicholas and Mack are both unaware of Dolph's alteration.At this point,who has primary liability over the note?

Accepted Answer

A) Nicholas 
B) Dolph 
C) Naresh 
D) Jeane 
A) Nicholas 
B) Dolph 
C) Naresh 
D) Jeane

Question 12

A person who has been authorized to sign a negotiable instrument on behalf of another person is known as a(n)________.

Accepted Answer

A) holder in due course 
B) accommodation party 
C) agent 
D) principal 
A) holder in due course 
B) accommodation party 
C) agent 
D) principal

Question 13

________ is a demand for acceptance or payment of an instrument made upon the maker,acceptor,drawee,or other payer by or on behalf of the holder.

Accepted Answer

A) Accommodation 
B) Duress 
C) Presentment 
D) Allonge 
A) Accommodation 
B) Duress 
C) Presentment 
D) Allonge

Question 14

A holder in due course takes an instrument free from personal defenses but not universal defenses.

Accepted Answer

A) True 
 B)False

Question 15

The defense of breach of contract is effective against an HDC.

Accepted Answer

A) True 
 B)False

Question 16

Adjudicated mental incompetence is a universal defense that can be raised against holders and HDCs.

Accepted Answer

A) True 
 B)False

Question 17

A person who authorizes an agent to sign a negotiable instrument on his or her behalf is known as a(n)________.

Accepted Answer

A) agent 
B) accommodation party 
C) principal 
D) assignor 
A) agent 
B) accommodation party 
C) principal 
D) assignor

Question 18

A person represented by a representative agent is known as the principal.

Accepted Answer

A) True 
 B)False

Question 19

All parties are discharged from liability on a negotiable instrument when ________.

Accepted Answer

A) the instrument is presented for payment 
B) the signature of the indorser is intentionally struck out 
C) the instrument is accidentally destroyed or mutilated 
D) a drawee in good faith pays an unaccepted instrument in full to the holder 
A) the instrument is presented for payment 
B) the signature of the indorser is intentionally struck out 
C) the instrument is accidentally destroyed or mutilated 
D) a drawee in good faith pays an unaccepted instrument in full to the holder

Question 20

In the context of instruments that are merely promises to pay,which of the following has primary liability?

Accepted Answer

A) the person in physical possession of the instrument 
B) the drawer of the instrument 
C) the drawee of the instrument 
D) the payee of the instrument 
A) the person in physical possession of the instrument 
B) the drawer of the instrument 
C) the drawee of the instrument 
D) the payee of the instrument

Exam 24: Liability, defenses, and Discharge

A signature in the lower-right corner of a promissory note indicates that the signer is the maker of the note.

Marks used in lieu of a written signature cannot be used for indorsements.

Which of the following actions by a holder constitutes the complete cancellation of a negotiable instrument?

The Federal Trade Commission (FTC)holder in due course (HDC)rule applies when a buyer ________.

What is a transfer of an instrument?

A presentment is a demand for the acceptance of a dishonored instrument.

A ________ defense is a type of defense that can be raised against both holders and HDCs.

Transfer warranties cannot be disclaimed if the indorsement states "without recourse."

List the presentment warranties related to negotiable instruments.

The payee of a cashier's check is also primarily liable on the instrument.

A person who has been authorized to sign a negotiable instrument on behalf of another person is known as a(n)________.

________ is a demand for acceptance or payment of an instrument made upon the maker,acceptor,drawee,or other payer by or on behalf of the holder.

A holder in due course takes an instrument free from personal defenses but not universal defenses.

The defense of breach of contract is effective against an HDC.

Adjudicated mental incompetence is a universal defense that can be raised against holders and HDCs.

A person who authorizes an agent to sign a negotiable instrument on his or her behalf is known as a(n)________.

A person represented by a representative agent is known as the principal.

All parties are discharged from liability on a negotiable instrument when ________.

In the context of instruments that are merely promises to pay,which of the following has primary liability?

Legal Environment of Business and Online Commerce

Courts and Jurisdiction

Judicial, alternative, and Online Dispute Resolution

Constitutional Law for Business and E-Commerce

Intentional Torts and Negligence

Product and Strict Liability

Intellectual Property and Cyber Piracy

Criminal Law and Cyber Crime

Nature of Traditional and E-Contracts

Agreement

Consideration and Promissory Estoppel

Capacity and Legality

Genuineness of Assent and Undue Influence

Statute of Frauds and Equitable Exceptions

Third-Party Rights and Discharge

Remedies for Breach of Traditional and E-Contracts

Digital Law and E-Commerce

Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

Remedies for Breach of Sales and Lease Contracts

Warranties

Creation of Negotiable Instruments

Holder in Due Course and Transferability

Banking System and Electronic Financial Transactions

Credit, mortgages, and Debtors Rights

Secured Transactions

Bankruptcy and Reorganization

Agency Formation and Termination

Liability of Principals, agents, and Independent Contractors

Employment, worker Protection, and Immigration Law

Labor Law

Equal Opportunity in Employment

Small Business, entrepreneurship, and General Partnerships

Limited Partnerships and Special Partnerships

Corporate Formation and Financing

Corporate Governance and the Sarbanes-Oxley Act

Corporate Acquisitions and Multinational Corporations

Limited Liability Companies and Limited Liability Partnerships

Franchises and Special Forms of Businesses

Investor Protection, e-Securities, and Wall Street Reform

Ethics and Social Responsibility of Business

Administrative Law and Regulatory Agencies

Consumer Protection and Product Safety

Environmental Protection

Antitrust Law and Unfair Trade Practices

Personal Property, real Property, and Insurance

Real Property

Landlord-Tenant Law and Land Use Regulation

Insurance

Accountants Duties and Liability

Wills, trusts, and Estates

Family Law

International and World Trade Law

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