Question 1

Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is

Accepted Answer

A) a draft. 
B) an order to accept delivery of money. 
C) a promise to accept delivery of goods. 
D) a promise to deliver goods. 
A) a draft. 
B) an order to accept delivery of money. 
C) a promise to accept delivery of goods. 
D) a promise to deliver goods.

Question 2

A drawer who is induced by an imposter to issue a check in the name of an impersonated payee can avoid payment on the check to an innocent holder.

Accepted Answer

A) True 
 B)False

Question 3

Jackson pays Phil in good faith for a promissory note.Phil warrants that the draft has not been altered.This warranty is a

Accepted Answer

A) presentment warranty. 
B) consideration warranty. 
C) conditional warranty. 
D) fixed warranty. 
A) presentment warranty. 
B) consideration warranty. 
C) conditional warranty. 
D) fixed warranty.

Question 4

A check "payable to the order of bearer" is neither an order instrument nor a bearer instrument.

Accepted Answer

A) True 
 B)False

Question 5

When there is a breach of an underlying contract for which an instrument was issued,the maker of a note can refuse to pay it.

Accepted Answer

A) True 
 B)False

Question 6

An instrument "payable to bearer" is transferable but not negotiable.

Accepted Answer

A) True 
 B)False

Question 7

Commercial Credit Company has in its possession an instrument dated May 1,2012.The instrument is payable to the order of Alpha Company "on June 1,2013," for $5,000.In the upper left corner is an address for Beta Corporation-10 Corporate Park Avenue,Chicago,Illinois-and in the lower right corner is the signature of "Delta,Inc.,By Eve,President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank,President,May 5,2012." On the back is the signature of "Alpha Company By Gail,President." Who,if anyone,is primarily liable on this instrument on May 1? On May 5? Who,if anyone,is secondarily liable on this instrument?

Accepted Answer

No one is primarily liable on this instr

Question 8

A maker of an instrument that is payable at a definite time does not have the option of paying before the stated date.

Accepted Answer

A) True 
 B)False

Question 9

Elinor performs ten hours of house cleaning for Zack in exchange for a promissory note for $400.At the time that Elinor accepts the note,she is aware that bankruptcy proceedings are being filed against Zack.Elinor

Accepted Answer

A) can obtain HDC status. 
B) cannot obtain HDC status,because she knows that there are bankruptcy proceedings against Zack. 
C) cannot obtain HDC status,because she did not fulfill the value requirement. 
D) cannot obtain HDC status,because she did not fulfill the good faith requirement. 
A) can obtain HDC status. 
B) cannot obtain HDC status,because she knows that there are bankruptcy proceedings against Zack. 
C) cannot obtain HDC status,because she did not fulfill the value requirement. 
D) cannot obtain HDC status,because she did not fulfill the good faith requirement.

Question 10

Maria signs an instrument payable to the order of National Loans,Inc.,"on or before" June 15. This instrument is

Accepted Answer

A) negotiable. 
B) nonnegotiable,because the maker can move up the payment date. 
C) nonnegotiable,because moving up the payment date is optional. 
D) nonnegotiable,because the exact payment date cannot be deter-mined from the face of the instrument. 
A) negotiable. 
B) nonnegotiable,because the maker can move up the payment date. 
C) nonnegotiable,because moving up the payment date is optional. 
D) nonnegotiable,because the exact payment date cannot be deter-mined from the face of the instrument.

Question 11

A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 12

Primary liability is unconditional.

Accepted Answer

A) True 
 B)False

Question 13

A person who transfers an instrument for consideration makes certain warranties to the transferee.

Accepted Answer

A) True 
 B)False

Question 14

The good faith requirement applies to both the holder and the transferor.

Accepted Answer

A) True 
 B)False

Question 15

Instruments that say nothing about when payment is due are payable on demand.

Accepted Answer

A) True 
 B)False

Question 16

Efron transfers an instrument to First Citizens Bank.This is not a negotiation unless

Accepted Answer

A) the parties bargained over the amount paid for the instrument. 
B) the transfer is an assignment. 
C) the instrument is a negotiable instrument. 
D) the transfer includes rights under a contract. 
A) the parties bargained over the amount paid for the instrument. 
B) the transfer is an assignment. 
C) the instrument is a negotiable instrument. 
D) the transfer includes rights under a contract.

Question 17

Ada is the maker of a note,on which Bart is secondarily liable.Cash & Credit Company (C&C) is the current holder of the note.Bart will be obli-gated to pay the note if

Accepted Answer

A) Ada defaults on the note. 
B) C&C breaches a transfer warranty. 
C) C&C negotiates the note to Delta Collection Agency,a third party. 
D) C&C presents the note for payment. 
A) Ada defaults on the note. 
B) C&C breaches a transfer warranty. 
C) C&C negotiates the note to Delta Collection Agency,a third party. 
D) C&C presents the note for payment.

Question 18

A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

Accepted Answer

A) True 
 B)False

Question 19

An instrument "payable to bearer" is negotiated by delivery.

Accepted Answer

A) True 
 B)False

Question 20

An ordinary holder can recover nothing on an instrument that has been materially altered.

Accepted Answer

A) True 
 B)False

Exam 17: Negotiability, transferability, and Liability

Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is

A drawer who is induced by an imposter to issue a check in the name of an impersonated payee can avoid payment on the check to an innocent holder.

Jackson pays Phil in good faith for a promissory note.Phil warrants that the draft has not been altered.This warranty is a

A check "payable to the order of bearer" is neither an order instrument nor a bearer instrument.

When there is a breach of an underlying contract for which an instrument was issued,the maker of a note can refuse to pay it.

An instrument "payable to bearer" is transferable but not negotiable.

A maker of an instrument that is payable at a definite time does not have the option of paying before the stated date.

Elinor performs ten hours of house cleaning for Zack in exchange for a promissory note for $400.At the time that Elinor accepts the note,she is aware that bankruptcy proceedings are being filed against Zack.Elinor

Maria signs an instrument payable to the order of National Loans,Inc.,"on or before" June 15. This instrument is

A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.

Primary liability is unconditional.

A person who transfers an instrument for consideration makes certain warranties to the transferee.

The good faith requirement applies to both the holder and the transferor.

Instruments that say nothing about when payment is due are payable on demand.

Efron transfers an instrument to First Citizens Bank.This is not a negotiation unless

Ada is the maker of a note,on which Bart is secondarily liable.Cash & Credit Company (C&C) is the current holder of the note.Bart will be obli-gated to pay the note if

A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

An instrument "payable to bearer" is negotiated by delivery.

An ordinary holder can recover nothing on an instrument that has been materially altered.

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