Exam 24: Liability, Defenses, and Discharge

Material alteration consists of adding to any part of a signed instrument, removing any part of a signed instrument, or making changes to the dollar amount of the instrument.

Liability on a negotiable instrument that is imposed on a party only when the party primarily liable on the instrument defaults and fails to pay the instrument when due is referred to as ________.

An accommodation party is secondarily liable if the accommodation is in a ________.

A person who signs an instrument and lends his or her name, and credit to another party to the instrument is referred to as a(n) ________.

________ is a demand for acceptance or payment of an instrument made upon the maker, acceptor, drawee, or other payer by or on behalf of the holder.

"All signatures are genuine or authorized" is a transfer warranty that a transferor of a negotiable instrument for consideration makes.

All parties are discharged from liability on a negotiable instrument when ________.

Lolek, who owes Stanislaw money, indorses a draft to him with the term "without recourse." The instrument later is dishonored. Which of the following types of indorsers is Lolek?

Warranty liability is imposed whether or not the transferor signed the instrument.

An accommodation party who signs an instrument guaranteeing payment is secondarily liable on the instrument.

What are the requirements for imposing secondary liability for a negotiable instrument?

Presentment warranties are made by the drawer of a check or draft.

Which of the following actions by a holder constitutes the complete cancellation of a negotiable instrument?

A person who authorizes an agent to sign a negotiable instrument on his or her behalf is known as a(n) ________.

Cameron, a purported agent, signs a contract and promissory note to purchase a building for Burnstar Constructions, a purported principal. Though Cameron is an unauthorized representative, Burnstar Constructions, the purported principal, likes the deal and accepts it. Which of the following is true of the deal ratified by Burnstar Constructions?

If a universal defense is proven, the holder or HDC cannot recover on the negotiable instrument.

Jennifer signs a promissory note to pay $2,500 to Clara. Clara negotiates the instrument and indorses it to Anthony. Anthony alters the note to make the payment amount $25,000 and negotiates the note to Nicholas. Nicholas indorses the note and negotiates it to Mack. Nicholas and Mack are both unaware of Anthony's alteration. If Mack presents the note to Jennifer for payment, how much, if anything is Jennifer obligated to pay?

Stanley, who owes Milton money, indorses a draft to him with the term "without recourse." The instrument later is dishonored. What liability does Stanley have on the instrument?

A transferee who took an instrument in good faith may recover damages for breach of transfer warranty from the warrantor equal to the loss suffered.

________ is a type of personal defense when a wrongdoer makes a false statement to another person to lead them to enter into a contract and issue a negotiable instrument.