Question 1

A conditional indorsement:

Accepted Answer

A) destroys the negotiability of the instrument. 
B) does not destroy the negotiability of an otherwise negotiable instrument. 
C) validates the instrument. 
D) does not destroy the negotiability of the instrument but invalidates it. 
A) destroys the negotiability of the instrument. 
B) does not destroy the negotiability of an otherwise negotiable instrument. 
C) validates the instrument. 
D) does not destroy the negotiability of the instrument but invalidates it. B

Question 2

Liz,the owner of a coffee shop in Dallas,contracts with Steve,a coffee bean supplier from Chicago,for $2,000 worth of coffee beans.Liz orders her bank to pay $2,000 from her account to Steve,or someone designated by Steve.Which of the following statements is false?

Accepted Answer

A) If the check is properly sent,sending the check is less risky than sending money. 
B) If someone steals the check along the way,Liz's bank may not pay anyone but Steve or someone authorized by Steve. 
C) The check is an inconvenient and risky way of doing business. 
D) The check is a practical substitute for cash. 
A) If the check is properly sent,sending the check is less risky than sending money. 
B) If someone steals the check along the way,Liz's bank may not pay anyone but Steve or someone authorized by Steve. 
C) The check is an inconvenient and risky way of doing business. 
D) The check is a practical substitute for cash. C

Question 3

A check payable "to cash" is an example of bearer paper.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following "signatures" would be insufficient to qualify an instrument as negotiable?

Accepted Answer

A) The maker wrote her name on the instrument with the intention of validating it. 
B) The drawer drew a symbol on the instrument with the intention of validating it. 
C) The maker uses a rubber-stamped signature on the instrument with the intention of validating it. 
D) A drawer,who cannot write her name,marked an "X" on the instrument outside of the presence of a witness,with the intention of validating it. 
A) The maker wrote her name on the instrument with the intention of validating it. 
B) The drawer drew a symbol on the instrument with the intention of validating it. 
C) The maker uses a rubber-stamped signature on the instrument with the intention of validating it. 
D) A drawer,who cannot write her name,marked an "X" on the instrument outside of the presence of a witness,with the intention of validating it.

Question 5

In the case in the text,In re Sia,the court held that:

Accepted Answer

A) the inclusion of the notice provision was burdensome and destroyed the negotiability of the note. 
B) the challenged clauses were not additional undertakings,and the note was negotiable. 
C) the inclusion of the conditional payment clause did not constitute a "fixed amount of money" and rendered the document nonnegotiable. 
D) the challenged clauses were additional undertakings,and the clauses destroyed the negotiability of the note. 
A) the inclusion of the notice provision was burdensome and destroyed the negotiability of the note. 
B) the challenged clauses were not additional undertakings,and the note was negotiable. 
C) the inclusion of the conditional payment clause did not constitute a "fixed amount of money" and rendered the document nonnegotiable. 
D) the challenged clauses were additional undertakings,and the clauses destroyed the negotiability of the note.

Question 6

In Heritage Bank v.Bruha,the case in the text,the court held that:

Accepted Answer

A) a variable rate of interest that referenced an index by Sherman County Bank rendered the promissory note nonnegotiable. 
B) a promissory note that evidenced a revolving line of credit was not a negotiable instrument. 
C) a promissory note obtained by fraud and/or misrepresentation was not a negotiable instrument. 
D) a promissory note satisfies the "fixed amount of money" requirement if it pertains to a revolving line of credit. 
A) a variable rate of interest that referenced an index by Sherman County Bank rendered the promissory note nonnegotiable. 
B) a promissory note that evidenced a revolving line of credit was not a negotiable instrument. 
C) a promissory note obtained by fraud and/or misrepresentation was not a negotiable instrument. 
D) a promissory note satisfies the "fixed amount of money" requirement if it pertains to a revolving line of credit.

Question 7

Selena Johnson has a checking account at the Union Bank of New York.She goes to Home Depot and agrees to buy a room heater priced at $200.She writes a check to pay for it.Home Depot is the:

Accepted Answer

A) payer. 
B) drawer. 
C) payee. 
D) drawee. 
A) payer. 
B) drawer. 
C) payee. 
D) drawee.

Question 8

Payments made with a credit card and payments made with a debit or ATM card are subject to:

Accepted Answer

A) both the federal law and the state law. 
B) only federal laws. 
C) only state laws. 
D) only local laws. 
A) both the federal law and the state law. 
B) only federal laws. 
C) only state laws. 
D) only local laws.

Question 9

Which section of the UCC covers how to deal with conflicting and ambiguous terms in a check?

Accepted Answer

A) 3-114 
B) 3-102 
C) 2-104 
D) 9-331 
A) 3-114 
B) 3-102 
C) 2-104 
D) 9-331

Question 10

The drafters of Revised Article 3 created a new and significant exception to the requirement that to be negotiable,an instrument must be payable to order or to bearer.What is it?

Accepted Answer

The drafters of Revised Article 3 create

Question 11

Jim Stanley writes a check on his checking account with a bank.In this instance,the bank is the drawee.

Accepted Answer

A) True 
 B)False

Question 12

To be negotiable,an instrument must be payable on demand or at a definite time.Under this test,how does the law treat instruments that do not state any time for payment?

Accepted Answer

This does not defeat negotiabi

Question 13

Instruments cannot be negotiable if they are payable in a foreign currency.

Accepted Answer

A) True 
 B)False

Question 14

A holder in due course of a negotiable instrument takes the instrument free of all defenses to the instrument except those that concern its:

Accepted Answer

A) validity. 
B) reliability. 
C) adaptability. 
D) collectability. 
A) validity. 
B) reliability. 
C) adaptability. 
D) collectability.

Question 15

A(n)________ is a person who has good title to the instrument,paid value for it,acquired it in good faith,and had no notice of certain claims of defenses against payment.

Accepted Answer

A) holder in due course 
B) beneficiary 
C) assignee 
D) assignor 
A) holder in due course 
B) beneficiary 
C) assignee 
D) assignor

Question 16

Shania Watson has a checking account at the Capital Bank of New York.She goes to Lowe's and agrees to buy an electric water heater priced at $700.She writes a check to pay for it.Shania is the ________ of the check.

Accepted Answer

A) payer 
B) drawer 
C) payee 
D) drawee 
A) payer 
B) drawer 
C) payee 
D) drawee

Question 17

Marion purchased a digital camera,paying with a promissory note.The note stated that Marion promised to pay $300 (the purchase price of the camera)in 10 monthly installments of $30 plus interest.Payments are due on the first day of each month,starting in January 2010.The interest is to be calculated as "three percent over the Chase Manhattan Prime Rate." Is this instrument negotiable?

Accepted Answer

A) No,because the future prime rate is not known at the time of the making of the note. 
B) No,because the note does not describe a fixed amount of money to be paid. 
C) Yes,because the variable rate of interest is calculated by reference to an index. 
D) Yes,because the future prime rate is known at the time of the making of the note. 
A) No,because the future prime rate is not known at the time of the making of the note. 
B) No,because the note does not describe a fixed amount of money to be paid. 
C) Yes,because the variable rate of interest is calculated by reference to an index. 
D) Yes,because the future prime rate is known at the time of the making of the note.

Question 18

Jack writes a check made payable to "Gary Stone and Susan Wright." Who may negotiate the check?

Accepted Answer

A) Neither Gary nor Susan because the check is unenforceable. 
B) Gary because he is the first named party to whom the check is made payable. 
C) Either Gary or Susan may negotiate the check. 
D) Both Gary and Susan have to negotiate the check. 
A) Neither Gary nor Susan because the check is unenforceable. 
B) Gary because he is the first named party to whom the check is made payable. 
C) Either Gary or Susan may negotiate the check. 
D) Both Gary and Susan have to negotiate the check.

Question 19

Which of the following instruments is nonnegotiable?

Accepted Answer

A) "I promise to pay to the order of Carol Reed $40,Jerry Jacobs." 
B) A statement in the instrument that it was given in payment of the previous month's rent. 
C) A statement in the instrument that it was given in payment of the purchase price of goods. 
D) "I promise to pay to the order of Meg Raven,at my option,$100 or five baskets of oranges,Dan Gilbert." 
A) "I promise to pay to the order of Carol Reed $40,Jerry Jacobs." 
B) A statement in the instrument that it was given in payment of the previous month's rent. 
C) A statement in the instrument that it was given in payment of the purchase price of goods. 
D) "I promise to pay to the order of Meg Raven,at my option,$100 or five baskets of oranges,Dan Gilbert."

Question 20

For an instrument to be negotiable,it must:

Accepted Answer

A) contain an undertaking or promise relative to collateral to secure payment. 
B) not state any other undertaking or instruction by the person promising or ordering to do any act in addition to the payment of money. 
C) contain an authorization for confession of judgment. 
D) contain a waiver of benefit of any law intended for the advantage or protection of an obligor. 
A) contain an undertaking or promise relative to collateral to secure payment. 
B) not state any other undertaking or instruction by the person promising or ordering to do any act in addition to the payment of money. 
C) contain an authorization for confession of judgment. 
D) contain a waiver of benefit of any law intended for the advantage or protection of an obligor.

Exam 31: Negotiable Instruments

A conditional indorsement:

Liz,the owner of a coffee shop in Dallas,contracts with Steve,a coffee bean supplier from Chicago,for $2,000 worth of coffee beans.Liz orders her bank to pay $2,000 from her account to Steve,or someone designated by Steve.Which of the following statements is false?

A check payable "to cash" is an example of bearer paper.

Which of the following "signatures" would be insufficient to qualify an instrument as negotiable?

In the case in the text,In re Sia,the court held that:

In Heritage Bank v.Bruha,the case in the text,the court held that:

Selena Johnson has a checking account at the Union Bank of New York.She goes to Home Depot and agrees to buy a room heater priced at $200.She writes a check to pay for it.Home Depot is the:

Payments made with a credit card and payments made with a debit or ATM card are subject to:

Which section of the UCC covers how to deal with conflicting and ambiguous terms in a check?

The drafters of Revised Article 3 created a new and significant exception to the requirement that to be negotiable,an instrument must be payable to order or to bearer.What is it?

Jim Stanley writes a check on his checking account with a bank.In this instance,the bank is the drawee.

To be negotiable,an instrument must be payable on demand or at a definite time.Under this test,how does the law treat instruments that do not state any time for payment?

Instruments cannot be negotiable if they are payable in a foreign currency.

A holder in due course of a negotiable instrument takes the instrument free of all defenses to the instrument except those that concern its:

A(n)________ is a person who has good title to the instrument,paid value for it,acquired it in good faith,and had no notice of certain claims of defenses against payment.

Shania Watson has a checking account at the Capital Bank of New York.She goes to Lowe's and agrees to buy an electric water heater priced at $700.She writes a check to pay for it.Shania is the ________ of the check.

Jack writes a check made payable to "Gary Stone and Susan Wright." Who may negotiate the check?

Which of the following instruments is nonnegotiable?

For an instrument to be negotiable,it must:

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

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Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

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Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

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Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

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Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

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