Exam 24: Liability, Defenses, and Discharge

Maria is the treasurer of Rex Caldwell Corporation. As treasurer, she makes out and signs the payroll checks for the company. Maria draws a payroll check payable to the order of her maid Carolyn Doss, who does not work for the company. Maria does not intend Carolyn to receive this money. She indorses Carolyn's name on the check and names herself as the indorsee. She cashes the check at a liquor store. Under which rule of forged instruments is Maria accountable?

Implied warranties are made when a negotiable instrument is originally issued.

Sylvester, acting as a representative agent for Jerry, signs a negotiable instrument with the signature-Jerry, by Sylvester, agent. What kind of liability does Sylvester have for this type of signature?

The ________ states that a drawer or maker is liable on a forged or unauthorized indorsement if the person signing as or on behalf of a drawer or maker intends the named payee to have no interest in the instrument or when the person identified as the payee is a fabricated person.

A person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on it.

A ________ defense is a type of defense that can be raised against both holders and HDCs.

A contract made by a person who has not yet been adjudicated to be mentally incompetent is considered void.

A person who has been authorized to sign a negotiable instrument on behalf of another person is known as a(n) ________.

Rhodes, a college student, wants to purchase a motorcycle on credit from Landier Motors. He does not have sufficient income or the credit history to justify the extension of credit to him alone. Rhodes asks his father to cosign a note to Landier Motors, which he does. What kind of liability does Rhodes's father come under?

What is material alteration as a universal defense to a negotiable instrument?

Joan signs a promissory note to pay $1,000 to Alex. Alex cleverly raises the note to $10,000 and negotiates the note to Ned. Ned indorses the note and negotiates it to Mark. When Mark presents the note to Joan for payment, she has to pay only the original amount of the note, $1,000.

Fraud in the inception is a type of personal defense.

Fraud in the inducement is a personal defense that is not effective against HDCs.

Marks used in lieu of a written signature cannot be used for indorsements.

A person represented by an agent is known as the principal.

Which of the following is a characteristic of a presentment warranty on an instrument presented for payment?

A(n) ________ defense is a type of defense that can be raised against enforcement of a negotiable instrument by an ordinary holder but not against an HDC.

Liability in which a person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on the instrument is referred to as ________.

The defense of breach of contract is effective against an HDC.

Discharge of an instrument by payment or cancellation is a type of ________.