Exam 24: Liability, defenses, and Discharge

Transfer warranties cannot be disclaimed with respect to checks.

Calvin,a college student,wants to purchase an automobile on credit from IronTilt Motors.He does not have sufficient income or the credit history to justify the extension of credit to him alone.Calvin asks his father to co-sign a note to IronTilt Motors,which he does.What role does Calvin's father fulfill here so that Calvin can buy the car?

Martha draws a check payable to the order of Stella.Stella indorses the check to Karen.But Leslie steals the check from Karen,forges Karen's indorsement,and cashes the check at a liquor store.Who is liable on the check?

If a universal defense is proven,the holder or HDC cannot recover on the negotiable instrument.

Lolek,who owes Stanislaw money,indorses a draft to him with the term "without recourse." The instrument later is dishonored.Which of the following types of indorsers is Lolek?

A(n)________ defense is a type of defense that can be raised against enforcement of a negotiable instrument by an ordinary holder but not against an HDC.

A purported principal is liable for an unauthorized signature by a purported agent.

An agent is only liable on the instrument that he or she signs in if it clearly mentions the principal.

A(n)________ is an action or event that relieves certain parties from liability on negotiable instruments.

An instrument is not considered canceled if it is destroyed or mutilated by accident or by an unauthorized third party.

Which of the following is a characteristic of a presentment warranty on an instrument presented for payment?

Susan purchases goods by telephone from Parker.Susan has never met Parker.Brenton goes to Susan and pretends to be Parker.Susan draws a check payable to the order of Parker and gives the check to Brenton,believing him to be Parker.Brenton forges Parker's indorsement and indorses the check to his brother,William,with the term "without recourse." William then cashes the check at a liquor store.Under the imposter rule,who is liable on the check?

Implied warranties are made when a negotiable instrument is originally issued.

Personal and universal defenses can be raised against a normal holder of a negotiable instrument.

Martha draws a check payable to the order of Stella.Stella indorses the check to Karen.But Leslie steals the check from Karen,forges Karen's indorsement,and cashes the check at a liquor store.When the forgery is exposed,whom can the liquor store legally recover from?

Presentment warranties are made by the drawer of a check or draft.

An accommodation party who signs an instrument guaranteeing payment is secondarily liable on the instrument.

Liability on a negotiable instrument that is imposed on a party only when the party primarily liable on the instrument defaults and fails to pay the instrument when due is referred to as ________.

Jennifer signs a promissory note to pay $2,500 to Clara.Clara negotiates the instrument and indorses it to Anthony.Anthony alters the note to make the payment amount $25,000 and negotiates the note to Nicholas.Nicholas indorses the note and negotiates it to Mack.Nicholas and Mack are both unaware of Anthony's alteration.If Mack presents the note to Jennifer for payment,how much,if anything is Jennifer obligated to pay?

A drawee is primarily liable on a draft when ________.