Question 1

If the instrument is order paper,how can a person become a holder?

Accepted Answer

A) Transfer of its possession. 
B) Its indorsement by the appropriate parties. 
C) Both (a) and (b) are necessary. 
D) None of the above. 
A) Transfer of its possession. 
B) Its indorsement by the appropriate parties. 
C) Both (a) and (b) are necessary. 
D) None of the above. C

Question 2

If the issuer and the person paying an instrument subject to the impostor rule are both negligent,comparative negligence would apply.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is not a restrictive indorsement?

Accepted Answer

A) "Pay only Jane Doe." 
B) "For deposit." 
C) "Pay any bank." 
D) "For collection." 
A) "Pay only Jane Doe." 
B) "For deposit." 
C) "Pay any bank." 
D) "For collection." A

Question 4

Horst,a holder in due course,buys a note made out by Arthur to Superior Motors.Even though Arthur's debt was discharged through bankruptcy,Horst can collect on the note.

Accepted Answer

A) True 
 B)False

Question 5

Joanne had a paycheck for $94 made out to her.She indorsed it with her name and gave it to Larry who,in return,agreed to paint her living and dining rooms the next Saturday.In this case:

Accepted Answer

A) the check is not negotiable. 
B) Larry is not a holder. 
C) Larry is not a holder in due course. 
D) Larry has given value for the check. 
A) the check is not negotiable. 
B) Larry is not a holder. 
C) Larry is not a holder in due course. 
D) Larry has given value for the check.

Question 6

The customary manner of disclaiming the indorser's contractual liability is to add which of the following sets of words before or after his signature?

Accepted Answer

A) For collection only. 
B) Without recourse. 
C) Pay to the order of. 
D) For deposit only. 
A) For collection only. 
B) Without recourse. 
C) Pay to the order of. 
D) For deposit only.

Question 7

An indorsement must be written on the instrument itself.

Accepted Answer

A) True 
 B)False

Question 8

A "without recourse" indorsement eliminates all of an indorser's liability.

Accepted Answer

A) True 
 B)False

Question 9

What is negotiation? How does one become a "holder" of an instrument?

Accepted Answer

Negotiation is an instrument's voluntary

Question 10

An indorsement in trust creates a trust for the benefit of the indorser or others.

Accepted Answer

A) True 
 B)False

Question 11

"Order paper" is negotiated by delivery only.

Accepted Answer

A) True 
 B)False

Question 12

An executory promise,which is valid consideration to support a contract,is also the giving of value to support holder in due course status.

Accepted Answer

A) True 
 B)False

Question 13

In a nonconsumer transaction,a holder in due course takes the instrument free from:

Accepted Answer

A) all claims on the part of any person. 
B) all defenses of any party with whom he has not dealt, except for a limited number of defenses that are available against anyone, including a holder in due course. 
C) the defense of incapacity, duress, or illegality that renders the obligation void. 
D) Both (a) and (b) are correct. 
A) all claims on the part of any person. 
B) all defenses of any party with whom he has not dealt, except for a limited number of defenses that are available against anyone, including a holder in due course. 
C) the defense of incapacity, duress, or illegality that renders the obligation void. 
D) Both (a) and (b) are correct.

Question 14

Maxine indorsed her paycheck by signing her name on the back,but she lost it on the way to the bank.The check is now comparable to cash because it is a bearer instrument.

Accepted Answer

A) True 
 B)False

Question 15

Michael issues a check to Paula.She negotiates the check to Hal as payment for a used television set.Hal has no notice of any claims or defenses and takes the check in good faith.Hal indorses the check and gives it to his son as a birthday present.Is Hal's son a holder in due course? What rights does he have with respect to the check? If Michael has a defense of fraud in the inducement against Paula,can he use that defense against Hal or Hal's son?

Accepted Answer

Hal's son is not a holder in due course

Question 16

To acquire the preferential rights of a holder in due course,a person either must meet the requirements of the UCC or must inherit the rights under the shelter rule.

Accepted Answer

A) True 
 B)False

Question 17

Delivery alone is insufficient to negotiate an instrument when it is payable to:

Accepted Answer

A) order and the last indorsement is in blank. 
B) cash and signed by the drawer. 
C) bearer and is not indorsed. 
D) the order of John Jones and is not indorsed. 
A) order and the last indorsement is in blank. 
B) cash and signed by the drawer. 
C) bearer and is not indorsed. 
D) the order of John Jones and is not indorsed.

Question 18

David makes and delivers a promissory note for $500 to the order of Kerry,who indorses the note and delivers it to Stan in payment of an outstanding debt Kerry owes him.Stan has given value as far as the Code requirements for a holder in due course.

Accepted Answer

A) True 
 B)False

Question 19

A forged or otherwise unauthorized signature necessary to negotiation breaks the chain of title to the instrument.

Accepted Answer

A) True 
 B)False

Question 20

The shelter rule did not exist at common law.

Accepted Answer

A) True 
 B)False

Exam 25: Transfer and Holder in Due Course

If the instrument is order paper,how can a person become a holder?

If the issuer and the person paying an instrument subject to the impostor rule are both negligent,comparative negligence would apply.

Which of the following is not a restrictive indorsement?

Horst,a holder in due course,buys a note made out by Arthur to Superior Motors.Even though Arthur's debt was discharged through bankruptcy,Horst can collect on the note.

Joanne had a paycheck for $94 made out to her.She indorsed it with her name and gave it to Larry who,in return,agreed to paint her living and dining rooms the next Saturday.In this case:

The customary manner of disclaiming the indorser's contractual liability is to add which of the following sets of words before or after his signature?

An indorsement must be written on the instrument itself.

A "without recourse" indorsement eliminates all of an indorser's liability.

What is negotiation? How does one become a "holder" of an instrument?

An indorsement in trust creates a trust for the benefit of the indorser or others.

"Order paper" is negotiated by delivery only.

An executory promise,which is valid consideration to support a contract,is also the giving of value to support holder in due course status.

In a nonconsumer transaction,a holder in due course takes the instrument free from:

Maxine indorsed her paycheck by signing her name on the back,but she lost it on the way to the bank.The check is now comparable to cash because it is a bearer instrument.

To acquire the preferential rights of a holder in due course,a person either must meet the requirements of the UCC or must inherit the rights under the shelter rule.

Delivery alone is insufficient to negotiate an instrument when it is payable to:

David makes and delivers a promissory note for $500 to the order of Kerry,who indorses the note and delivers it to Stan in payment of an outstanding debt Kerry owes him.Stan has given value as far as the Code requirements for a holder in due course.

A forged or otherwise unauthorized signature necessary to negotiation breaks the chain of title to the instrument.

The shelter rule did not exist at common law.

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property, property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

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