Question 1

A transferee who took an instrument in good faith may recover damages for breach of transfer warranty from the warrantor equal to the loss suffered.

Accepted Answer

A) True 
 B)False

Question 2

Sylvester,acting as a representative agent for Jerry,signs a negotiable instrument with the signature-Jerry,by Sylvester,agent.What kind of liability does Sylvester have for this type of signature?

Accepted Answer

A) He is not liable on the instrument. 
B) He is liable to the payee. 
C) He is liable to Jerry. 
D) He is liable to the HDC of the instrument. 
A) He is not liable on the instrument. 
B) He is liable to the payee. 
C) He is liable to Jerry. 
D) He is liable to the HDC of the instrument.

Question 3

In which of the following is an accommodation party primarily liable?

Accepted Answer

A) guarantee of payment 
B) guarantee of collection 
C) guarantee of demand 
D) guarantee of promise 
A) guarantee of payment 
B) guarantee of collection 
C) guarantee of demand 
D) guarantee of promise

Question 4

A qualified indorser is only liable for secondary liability.

Accepted Answer

A) True 
 B)False

Question 5

The holder of a negotiable instrument can discharge the liability of any party to the instrument by cancellation.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following actions by the holder causes an impairment of the right of recourse?

Accepted Answer

A) releasing an obligor party from liability 
B) withholding collateral that would benefit that party 
C) writing "canceled" on the face of the instrument 
D) destruction of the instrument with the intent of eliminating the obligation 
A) releasing an obligor party from liability 
B) withholding collateral that would benefit that party 
C) writing "canceled" on the face of the instrument 
D) destruction of the instrument with the intent of eliminating the obligation

Question 7

A person who signs an instrument and lends his or her name,and credit to another party to the instrument is referred to as a(n)________.

Accepted Answer

A) agent 
B) qualified indorser 
C) unqualified indorser 
D) accommodation party 
A) agent 
B) qualified indorser 
C) unqualified indorser 
D) accommodation party

Question 8

"All signatures are genuine or authorized" is a transfer warranty that a transferor of a negotiable instrument for consideration makes.

Accepted Answer

A) True 
 B)False

Question 9

________ refers to a situation in which certain parties are discharged from liability on an instrument by the action of the holder.

Accepted Answer

A) Impairment of the right of recourse 
B) Fraud in the inception 
C) Fraud in the inducement 
D) Discharge in bankruptcy 
A) Impairment of the right of recourse 
B) Fraud in the inception 
C) Fraud in the inducement 
D) Discharge in bankruptcy

Question 10

A check is only accepted once it has been verified by the bank.

Accepted Answer

A) True 
 B)False

Question 11

Liability in which a person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on the instrument is referred to as ________.

Accepted Answer

A) warranty liability 
B) unqualified liability 
C) contract liability 
D) accommodation 
A) warranty liability 
B) unqualified liability 
C) contract liability 
D) accommodation

Question 12

Discharge of an instrument by payment can be raised against enforcement of a negotiable instrument by an ordinary holder.

Accepted Answer

A) True 
 B)False

Question 13

Fraud in the inception is a type of personal defense.

Accepted Answer

A) True 
 B)False

Question 14

Absolute liability to pay a negotiable instrument,subject to certain universal or real defenses is known as ________.

Accepted Answer

A) primary liability 
B) secondary liability 
C) warranty liability 
D) signature liability 
A) primary liability 
B) secondary liability 
C) warranty liability 
D) signature liability

Question 15

Which of the following is a rule that eliminates HDC status with regard to negotiable instruments that arise out of certain consumer credit transactions?

Accepted Answer

A) FTC HDC rule 
B) exclusionary rule 
C) imposter rule 
D) fictitious payee rule 
A) FTC HDC rule 
B) exclusionary rule 
C) imposter rule 
D) fictitious payee rule

Question 16

Those who disclaim liability and are not secondarily liable on instruments they endorse are referred to as ________.

Accepted Answer

A) unqualified indorsers 
B) qualified indorsers 
C) agents 
D) accommodation parties 
A) unqualified indorsers 
B) qualified indorsers 
C) agents 
D) accommodation parties

Question 17

Martin borrows $15,000 from Tom,in the form of a check,and signs a promissory note,promising to pay Tom this amount plus 10 percent interest in one year.Tom indorses the note and negotiates it to Fronston.Fronston indorses the note and negotiates it to Liza.Liza presents the note to Martin for payment when the note is due.Martin refuses to pay the note.Who is secondarily liable to pay Liza?

Accepted Answer

A) Tom 
B) Frontston 
C) Martin 
D) the bank that issued the check to Tom 
A) Tom 
B) Frontston 
C) Martin 
D) the bank that issued the check to Tom

Question 18

A contract made by a person who has not yet been adjudicated to be mentally incompetent is considered void.

Accepted Answer

A) True 
 B)False

Question 19

A signature on a negotiable instrument can be any name,word,or mark used in lieu of a written signature.

Accepted Answer

A) True 
 B)False

Question 20

What are forged negotiable instruments?

Accepted Answer

Article 3 of the Under the Uniform Comme

Exam 24: Liability, defenses, and Discharge

A transferee who took an instrument in good faith may recover damages for breach of transfer warranty from the warrantor equal to the loss suffered.

Sylvester,acting as a representative agent for Jerry,signs a negotiable instrument with the signature-Jerry,by Sylvester,agent.What kind of liability does Sylvester have for this type of signature?

In which of the following is an accommodation party primarily liable?

A qualified indorser is only liable for secondary liability.

The holder of a negotiable instrument can discharge the liability of any party to the instrument by cancellation.

Which of the following actions by the holder causes an impairment of the right of recourse?

A person who signs an instrument and lends his or her name,and credit to another party to the instrument is referred to as a(n)________.

"All signatures are genuine or authorized" is a transfer warranty that a transferor of a negotiable instrument for consideration makes.

________ refers to a situation in which certain parties are discharged from liability on an instrument by the action of the holder.

A check is only accepted once it has been verified by the bank.

Liability in which a person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on the instrument is referred to as ________.

Discharge of an instrument by payment can be raised against enforcement of a negotiable instrument by an ordinary holder.

Fraud in the inception is a type of personal defense.

Absolute liability to pay a negotiable instrument,subject to certain universal or real defenses is known as ________.

Which of the following is a rule that eliminates HDC status with regard to negotiable instruments that arise out of certain consumer credit transactions?

Those who disclaim liability and are not secondarily liable on instruments they endorse are referred to as ________.

A contract made by a person who has not yet been adjudicated to be mentally incompetent is considered void.

A signature on a negotiable instrument can be any name,word,or mark used in lieu of a written signature.

What are forged negotiable instruments?

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