Question 1

Jeff's grandmother is the payee of a promissory note for $7,500.Jeff's grandmother gives Jeff the note for his sixteenth birthday.Jeff is

Accepted Answer

A) an HDC. 
B) not an HDC,because he received the note as a gift. 
C) not an HDC,because he is a minor. 
D) not an HDC,because the note was for less than $10,000. 
A) an HDC. 
B) not an HDC,because he received the note as a gift. 
C) not an HDC,because he is a minor. 
D) not an HDC,because the note was for less than $10,000.

Question 2

A person cannot become an HDC if a defense against payment is appar-ent on the face of the instrument.

Accepted Answer

A) True 
 B)False

Question 3

Rubin writes a check drawn on his account at Clearwater Bank and payable to the order of Gwyn.The bank does not pay the check.Rubin is

Accepted Answer

A) absolved of liability on the check. 
B) liable to Gwyn for the amount of the check. 
C) liable to the bank for the amount of the check. 
D) entitled to payment of the amount of the check from Gwyn. 
A) absolved of liability on the check. 
B) liable to Gwyn for the amount of the check. 
C) liable to the bank for the amount of the check. 
D) entitled to payment of the amount of the check from Gwyn.

Question 4

Opalina asks Paolo,who does not understand English,to sign what Opalina says is an application to open a bank account.In fact,the "application" is a note.If sued on the note by an HDC

Accepted Answer

A) Paolo must pay the note. 
B) Paolo's best defense would be fraud in the execution. 
C) Paolo's best defense would be fraud in the inducement. 
D) Paolo's best defense would be mistake. 
A) Paolo must pay the note. 
B) Paolo's best defense would be fraud in the execution. 
C) Paolo's best defense would be fraud in the inducement. 
D) Paolo's best defense would be mistake.

Question 5

Cash National Bank is an HDC of a note for $1,000 on which there is the forged signature of "Dudley." If sued on the note by Cash

Accepted Answer

A) Dudley must pay the note. 
B) Dudley's best defense would be fraud in the execution. 
C) Dudley's best defense would be material alteration. 
D) Dudley's best defense would be forgery. 
A) Dudley must pay the note. 
B) Dudley's best defense would be fraud in the execution. 
C) Dudley's best defense would be material alteration. 
D) Dudley's best defense would be forgery.

Question 6

An instrument payable "with ten hours of services" is negotiable.

Accepted Answer

A) True 
 B)False

Question 7

Fred has six nieces,ages five to sixteen.He writes an order instrument for $50 that states,"Pay to the order of my niece." The order instrument is

Accepted Answer

A) negotiable. 
B) nonnegotiable,because the amount of money is less than $500. 
C) nonnegotiable,because it is illegal to write an order instrumentpayable to a relative. 
D) nonnegotiable,because there is no specific person identified. 
A) negotiable. 
B) nonnegotiable,because the amount of money is less than $500. 
C) nonnegotiable,because it is illegal to write an order instrumentpayable to a relative. 
D) nonnegotiable,because there is no specific person identified.

Question 8

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Accepted Answer

A) True 
 B)False

Question 9

Rubber stamp signatures can be legally binding signatures.

Accepted Answer

A) True 
 B)False

Question 10

Karen writes on a piece of paper,"I owe you $600," signs it,and gives it to Lou.This instrument is

Accepted Answer

A) negotiable. 
B) nonnegotiable,because it does not include an express promise to pay. 
C) nonnegotiable,because it does not recite any consideration. 
D) nonnegotiable,because it does not state any conditions to payment. 
A) negotiable. 
B) nonnegotiable,because it does not include an express promise to pay. 
C) nonnegotiable,because it does not recite any consideration. 
D) nonnegotiable,because it does not state any conditions to payment.

Question 11

A holder takes an instrument for value if he or she gives a check as pay-ment for it.

Accepted Answer

A) True 
 B)False

Question 12

Beth,an accountant for Credits & Debits,acquires a negotiable instru-ment from Ellen by promis-ing to pay its face value in thirty days.Beth ac-quires the status of an HDC when she

Accepted Answer

A) acquires possession of the negotiable instrument. 
B) agrees with Ellen to buy the negotiable instrument. 
C) pays the face value due on the instrument. 
D) transfers the instrument to another party. 
A) acquires possession of the negotiable instrument. 
B) agrees with Ellen to buy the negotiable instrument. 
C) pays the face value due on the instrument. 
D) transfers the instrument to another party.

Exam 17: Negotiability, transferability, and Liability

Jeff's grandmother is the payee of a promissory note for $7,500.Jeff's grandmother gives Jeff the note for his sixteenth birthday.Jeff is

A person cannot become an HDC if a defense against payment is appar-ent on the face of the instrument.

Rubin writes a check drawn on his account at Clearwater Bank and payable to the order of Gwyn.The bank does not pay the check.Rubin is

Opalina asks Paolo,who does not understand English,to sign what Opalina says is an application to open a bank account.In fact,the "application" is a note.If sued on the note by an HDC

Cash National Bank is an HDC of a note for $1,000 on which there is the forged signature of "Dudley." If sued on the note by Cash

An instrument payable "with ten hours of services" is negotiable.

Fred has six nieces,ages five to sixteen.He writes an order instrument for $50 that states,"Pay to the order of my niece." The order instrument is

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Rubber stamp signatures can be legally binding signatures.

Karen writes on a piece of paper,"I owe you $600," signs it,and gives it to Lou.This instrument is

A holder takes an instrument for value if he or she gives a check as pay-ment for it.

Beth,an accountant for Credits & Debits,acquires a negotiable instru-ment from Ellen by promis-ing to pay its face value in thirty days.Beth ac-quires the status of an HDC when she

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