Exam 24: Liability, defenses, and Discharge

The ________ states that a drawer or maker is liable on a forged or unauthorized indorsement if the person signing as or on behalf of a drawer or maker intends the named payee to have no interest in the instrument or when the person identified as the payee is a fabricated person.

Material alteration consists of adding to any part of a signed instrument,removing any part of a signed instrument,or making changes to the dollar amount of the instrument.

What is material alteration as a universal defense to a negotiable instrument?

Extreme duress is considered a personal defense.

An unqualified indorser has secondary liability on negotiable instruments.

What is the defense of fraud in the inducement?

An imposter is someone who impersonates a payee and induces the maker or drawer to issue an instrument in the payee's name and give the instrument to the imposter.

The FTC rules apply to consumer credit transactions in which the buyer signs a sales contract that includes an order to pay.

Which of the following is a similarity between the fictitious payee rule and the imposter rule?

Fraud in the inducement is a personal defense that is not effective against HDCs.

Cameron,a purported agent,signs a contract and promissory note to purchase a building for Burnstar Constructions,a purported principal.Though Cameron is an unauthorized representative,Burnstar Constructions,the purported principal,likes the deal and accepts it.Which of the following is true of the deal ratified by Burnstar Constructions?

________ is a type of personal defense when a wrongdoer makes a false statement to another person to lead them to enter into a contract and issue a negotiable instrument.

Discharge of an instrument by payment or cancellation is a type of ________.

What are the requirements for imposing secondary liability for a negotiable instrument?

An accommodation party is secondarily liable if the accommodation is in a ________.

Those who are secondarily liable on negotiable instruments they endorse are known as ________.

Transfer warranties would be applicable to which of the following placements of a negotiable instrument?

A person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on it.

A minor who does not misrepresent his or her age can disaffirm negotiable instruments.

Maria is the treasurer of Rex Caldwell Corporations.As treasurer,she makes out and signs the payroll checks for the company.Maria draws a payroll check payable to the order of her maid Carolyn Doss,who does not work for the company.Maria does not intend Carolyn to receive this money.She indorses Carolyn's name on the check and names herself as the indorsee.She cashes the check at a liquor store.Under which rule of forged instruments is Maria accountable?