Exam 26: Liability, Defenses, and Discharge

Celia, an employee of Delite Dairy Company, forges the signature of Elin, Delite's president, on a Delite check and cashes it at First Federal Bank. Elin would ratify Celia's actions by

To properly present a draft for payment, the holder must present it to the drawer.

Destruction or mutilation of a negotiable instrument by accident discharges it.

Dale issues a check for $4,000, dated June 1, to Evelyn. The check is drawn on First Federal Bank. Evelyn indorses the check and transfers it to Gene. What will trigger the liability of Dale and Evelyn on the check

Warranty liability is subject to the conditions of proper presentment, dishonor, and notice of dishonor.

To borrow the money to buy a car, Klaus signs a note "payable to the order of Lake City Auto Financing." Minnie cosigns the note to guarantee the repayment of the loan. Minnie's liability on this note is

Audio Science Company's agent Bailey is authorized to draw checks on Audio Science's account in Citizen Bank. The checks are preprinted with the company name. Bailey writes a check "pay to the order of Darlene [signed] Bailey." Darlene presents the check for payment. If Citizen Bank dishonors it, liability extends to

Chris convinces Dion, who does not understand English, to sign a $1,000 note that Dion believes is an application for a credit card. Chris negotiates the note to EZ Finance Company. Dion

An authorized agent binds a principal on an instrument if the agent clearly names the principal in the signature.

Ethel signs a note "payable to the order of Fidelity Bank." Fidelity indorses the note in blank and negotiates it to Ghani, who sells it to Huck. Liability associated with the transfer of the note from Ghani to Huck is

Derby Stables writes a check to Extendo Credit, Inc., that is drawn on Derby's account at Farm & Ranch Bank. If the bank does not accept the check, liability for its amount is on

Presentment warranties protect the person to whom an instrument is presented for payment.

Transfer of an order instrument by indorsement and delivery extends warranty liability to any subsequent holder who takes the instrument in good faith.

All parties to a negotiable instrument will be discharged when the party primarily liable on it pays to a holder the full amount due.

Rodeo Ranch's agent Slim is authorized to write checks on Rodeo Ranch's account in Town Bank. Upper Range Corporation is a Rodeo Ranch supplier. Slim writes a check on Rodeo Ranch's account "pay to the order of Upper Range [signed] Slim," indorses it in Upper Range's name, and deposits it in his own account in Verity Bank. If Verity Bank collects payment, the ultimate party most likely to suffer the loss is

Failure to present an instrument on time is not improper presentment.

Fact Pattern 26-1A Seymour writes a check on his account at Platinum Bank to Teri to pay a debt. Teri negotiates the check by indorsement to Rosanna, who presents it for payment to Onyx Bank. -Refer to Fact Pattern 26-1A. If Onyx Bank dishonors the check, Rosanna can obtain payment from Teri

Nero signs a check "pay to the order of Olive" drawn on Nero's account in Peachtree Bank. Olive signs the back of the check. Secondary liability on this check extends to

A signature can be made by use of any device or machine.

Ian transfers a note, for consideration, to Jock by blank indorsement and delivery. Jock transfers the note to Kelly, who takes it in good faith. What does Ian warrant to Kelly