Question 1

An instrument which reads "For deposit only" is an example of a _____.

Accepted Answer

A)  qualified indorsement 
B)  special indorsement 
C)  restrictive indorsement 
D)  blank indorsement 
A)  qualified indorsement 
B)  special indorsement 
C)  restrictive indorsement 
D)  blank indorsement

Question 2

Indorsing an instrument,such as by writing the words "Pay to Sara Garcia," limits payment to Sara Garcia and further negotiation becomes void.

Accepted Answer

A) True 
 B)False

Question 3

A claim in recoupment:

Accepted Answer

A)  is a claim of the original payee against the obligor of the instrument. 
B)  must arise from the transaction that gave rise to the instrument. 
C)  is actually not an offset to liability, but a defense to an instrument. 
D)  can make a person a holder in due course even if he knows about it before the negotiation. 
A)  is a claim of the original payee against the obligor of the instrument. 
B)  must arise from the transaction that gave rise to the instrument. 
C)  is actually not an offset to liability, but a defense to an instrument. 
D)  can make a person a holder in due course even if he knows about it before the negotiation.

Question 4

Generally,a person who takes an instrument with a restrictive indorsement must pay or apply any money or other value he gives for the instrument consistently with the indorsement.

Accepted Answer

A) True 
 B)False

Question 5

The form of the indorsement that an indorser uses affects future attempts to negotiate the instrument.

Accepted Answer

A) True 
 B)False

Question 6

A holder in due course takes a negotiable instrument free of all:

Accepted Answer

A)  negotiable defenses. 
B)  real defenses. 
C)  claims in recoupment. 
D)  claims to the bearer. 
A)  negotiable defenses. 
B)  real defenses. 
C)  claims in recoupment. 
D)  claims to the bearer.

Question 7

Which of the following statements is true of a qualified indorsement?

Accepted Answer

A)  It does not change the negotiable nature of the instrument. 
B)  It specifies the purpose of the indorsement or specifies the use to be made of the instrument. 
C)  It contains the signature of the indorser along with the words indicating to whom, or to whose order, the instrument is payable. 
D)  It does not eliminate the contractual liability of the indorser. 
A)  It does not change the negotiable nature of the instrument. 
B)  It specifies the purpose of the indorsement or specifies the use to be made of the instrument. 
C)  It contains the signature of the indorser along with the words indicating to whom, or to whose order, the instrument is payable. 
D)  It does not eliminate the contractual liability of the indorser.

Question 8

When indorsing an instrument,the holder must spell her name in the same way as it appears on the instrument.

Accepted Answer

A) True 
 B)False

Question 9

A holder in due course takes a negotiable instrument free of the real defenses.

Accepted Answer

A) True 
 B)False

Question 10

Lei signs a 30-day note payable to Yuan Appliances Inc.for $500 and gives it to Yuan as payment for a washing machine.When Yuan asks Lei for payment,she refuses to pay because the washing machine does not work properly.Yuan informs a bank about Lei's refusal to pay and then negotiates the note to the bank.Which of the following statements is true of this case?

Accepted Answer

A)  The bank is not a holder in due course of the note. 
B)  The bank is a holder in due course of the note. 
C)  A dishonored instrument always makes the indorser the holder. 
D)  Yuan is the holder in due course. 
A)  The bank is not a holder in due course of the note. 
B)  The bank is a holder in due course of the note. 
C)  A dishonored instrument always makes the indorser the holder. 
D)  Yuan is the holder in due course.

Exam 39: Negotiation and Holder in Due Course

An instrument which reads "For deposit only" is an example of a _____.

Indorsing an instrument,such as by writing the words "Pay to Sara Garcia," limits payment to Sara Garcia and further negotiation becomes void.

A claim in recoupment:

Generally,a person who takes an instrument with a restrictive indorsement must pay or apply any money or other value he gives for the instrument consistently with the indorsement.

The form of the indorsement that an indorser uses affects future attempts to negotiate the instrument.

A holder in due course takes a negotiable instrument free of all:

Which of the following statements is true of a qualified indorsement?

When indorsing an instrument,the holder must spell her name in the same way as it appears on the instrument.

A holder in due course takes a negotiable instrument free of the real defenses.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Propertypart Two Contracts

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remediespart Three Sales

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contractspart Four Agency and Employment

The Agency Relationship-Creation, duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws-Part Five Business Organizations

Which Form of Business Organization

Partnerships

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Management of the Corporate Business

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Securities Regulation

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Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance-Part Seven Commercial Paper

Negotiable Instruments

Liability of Parties

Checks and Electronic Fund Transfers-Part Eight Credit Transactions

Introduction to Security

Security Interests in Personal Property

Bankruptcy-Part Nine Government Regulation

The Antitrust Laws

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