Question 1

A person who in good faith acquires a negotiable instrument from a thief cannot become an HDC under any circumstances.

Accepted Answer

A) True 
 B)False

Question 2

LNG Corporation and Midstates Utility Company enter a contract for a sale of liquefied natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft.
-Refer to Fact Pattern 23-2. This instrument is

Accepted Answer

A) a banker's acceptance. 
B) a nonnegotiable instrument. 
C) apromissory note. 
D) a trade acceptance. 
A) a banker's acceptance. 
B) a nonnegotiable instrument. 
C) apromissory note. 
D) a trade acceptance.

Question 3

Under the fictitious payee rule,the payee's indorsement is not treated as a forgery.

Accepted Answer

A) True 
 B)False

Question 4

Plumbing & Pipes Supply Company issues a promissory note as a demand instrument with a due date of October 5. QuikPay Loan Company accepts the note. QuikPay has notice that the note is overdue if the firm takes the note

Accepted Answer

A) after October 5. 
B) before October 5. 
C) on October 5. 
D) at any time. 
A) after October 5. 
B) before October 5. 
C) on October 5. 
D) at any time.

Question 5

A person whose name is forged on an instrument normally has no liability to pay any holder the value of the instrument.

Accepted Answer

A) True 
 B)False

Question 6

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

Accepted Answer

A) True 
 B)False

Question 7

On the back of a check payable to Nero,he writes "Pay to Odell,without recourse" and signs it. This

Accepted Answer

A) does not effect the check's negotiability or any party's liability. 
B) relieves Nero of liability on the check. 
C) relieves Odell of liability on the check. 
D) renders the check nonnegotiable. 
A) does not effect the check's negotiability or any party's liability. 
B) relieves Nero of liability on the check. 
C) relieves Odell of liability on the check. 
D) renders the check nonnegotiable.

Question 8

LNG Corporation and Midstates Utility Company enter a contract for a sale of liquefied natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft.
-Refer to Fact Pattern 23-2. On this instrument,LNG is

Accepted Answer

A) thebanker. 
B) thedrawer. 
C) themaker. 
D) the trader. 
A) thebanker. 
B) thedrawer. 
C) themaker. 
D) the trader.

Question 9

To finance the purchase of an electric guitar and amplifier from Leon's Guitars,Milo signs an instrument promising to pay to "National Lenders" $1,800 with interest in installments with the final payment due August 15,2016. To be negotiable,this instrument must include on its face

Accepted Answer

A) any conditions on the sale of the goods. 
B) any conditions to the disbursement of the funds. 
C) any conditions to the repayment of the loan. 
D) no conditions. 
A) any conditions on the sale of the goods. 
B) any conditions to the disbursement of the funds. 
C) any conditions to the repayment of the loan. 
D) no conditions.

Question 10

Ray pays Slim in good faith for a promissory note. Slim warrants that the note has not been altered. This is

Accepted Answer

A) a presentment warranty. 
B) a transfer warranty. 
C) a signature warranty. 
D) a breach of warranty. 
A) a presentment warranty. 
B) a transfer warranty. 
C) a signature warranty. 
D) a breach of warranty.

Question 11

On a sheet of paper,Elle writes,without her signature,"I acknowledge that I owe Frank $600,payable out of the proceeds of the sale of my car,a 1995 Honda Civic,which I promise to advertise 'For Sale' next week. Payment is to be made on or before six months from today." What type of instrument is this? Is it nego-tiable? If not,why not?

Accepted Answer

This instrument is a promissory note,but

Question 12

An instrument is not defective simply because it is overdue.

Accepted Answer

A) True 
 B)False

Question 13

One of the transfer warranties is that the instrument has not been altered.

Accepted Answer

A) True 
 B)False

Question 14

Barry draws a check payable to "Cash" and presents it to Dollars & Sensestore for payment. This instrument is

Accepted Answer

A) a bearer instrument. 
B) an order instrument. 
C) valid but nonnegotiable. 
D) void. 
A) a bearer instrument. 
B) an order instrument. 
C) valid but nonnegotiable. 
D) void.

Question 15

GR8 Products,Inc.,warrants its goods to be free of defects. Heck issues an instrument to obtain goods from GR8 that prove defective. With respect to payment on the instrument,Heck

Accepted Answer

A) is liable only to a subsequent holder of the instrument. 
B) has a universal defense against it. 
C) has a personal defense against it. 
D) cannot avoid it. 
A) is liable only to a subsequent holder of the instrument. 
B) has a universal defense against it. 
C) has a personal defense against it. 
D) cannot avoid it.

Question 16

Dishonor occurs if payment of an instrument cannot be obtained within the prescribed time.

Accepted Answer

A) True 
 B)False

Question 17

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

Accepted Answer

A) True 
 B)False

Question 18

Vicenzo,in good faith and for value,gets from Wren a check "payable to the order of bearer." Vicenzo does not know that Wren stole the check. Vicenzo is

Accepted Answer

A) an HDC. 
B) not an HDC,because Wren did not acquire the check for value. 
C) not an HDC,because Wren did not acquire the check in good faith. 
D) not an HDC,because the check is a bearer instrument. 
A) an HDC. 
B) not an HDC,because Wren did not acquire the check for value. 
C) not an HDC,because Wren did not acquire the check in good faith. 
D) not an HDC,because the check is a bearer instrument.

Question 19

To properly present a draft for payment,the holder must present it to the drawer.

Accepted Answer

A) True 
 B)False

Question 20

An imposter's indorsement on an instrument is never effective against its drawer or maker.

Accepted Answer

A) True 
 B)False

Exam 23: Negotiable Instruments

A person who in good faith acquires a negotiable instrument from a thief cannot become an HDC under any circumstances.

LNG Corporation and Midstates Utility Company enter a contract for a sale of liquefied natural gas. LNG draws a draft unconditionally ordering Midstates Utility to pay $50,000 to LNG's order in sixty days. Midstates Utility signs and dates the draft. -Refer to Fact Pattern 23-2. This instrument is

Under the fictitious payee rule,the payee's indorsement is not treated as a forgery.

Plumbing & Pipes Supply Company issues a promissory note as a demand instrument with a due date of October 5. QuikPay Loan Company accepts the note. QuikPay has notice that the note is overdue if the firm takes the note

A person whose name is forged on an instrument normally has no liability to pay any holder the value of the instrument.

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

On the back of a check payable to Nero,he writes "Pay to Odell,without recourse" and signs it. This

To finance the purchase of an electric guitar and amplifier from Leon's Guitars,Milo signs an instrument promising to pay to "National Lenders" $1,800 with interest in installments with the final payment due August 15,2016. To be negotiable,this instrument must include on its face

Ray pays Slim in good faith for a promissory note. Slim warrants that the note has not been altered. This is

An instrument is not defective simply because it is overdue.

One of the transfer warranties is that the instrument has not been altered.

Barry draws a check payable to "Cash" and presents it to Dollars & Sensestore for payment. This instrument is

GR8 Products,Inc.,warrants its goods to be free of defects. Heck issues an instrument to obtain goods from GR8 that prove defective. With respect to payment on the instrument,Heck

Dishonor occurs if payment of an instrument cannot be obtained within the prescribed time.

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

Vicenzo,in good faith and for value,gets from Wren a check "payable to the order of bearer." Vicenzo does not know that Wren stole the check. Vicenzo is

To properly present a draft for payment,the holder must present it to the drawer.

An imposter's indorsement on an instrument is never effective against its drawer or maker.

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