Exam 40: Liability of Parties

The Uniform Commercial Code (UCC) allows any indorsement in the name of a fictitious payee to be effective as the payee's indorsement in favor of any person that pays the instrument in good faith or takes it for value or for collection.

What are the most common ways an obligor on a negotiable instrument is discharged from his liability?

Transfer warranties may not be utilized after the time for giving notice of dishonor has expired.

Which of the following statements is true of the obligations of a maker?

When a person signs a negotiable instrument, she generally becomes contractually liable on the instrument.

List the six transfer warranties made by a person who transfers his or her negotiable instrument to someone else and for consideration.

Ivan is a representative of Sigma Inc., Checks are drawn by "Sigma Inc., Payroll Account (signed) D. Ivan," but the checks are not paid. Who is liable on the instrument-the individual or the corporation? When a representative signs an authorized signature to an instrument, then the representative is not bound provided the signature shows "unambiguously" that the signature was made on behalf of the represented person who is named in the instrument. Sigma Inc. is, therefore, liable for payment of the checks and not Ivan, even though Ivan signed the checks.

A person who transfers a negotiable instrument to someone else and for consideration makes a warranty that:

The terms of the contract of the parties to a negotiable instrument are typically set out in the text of the instrument.

The rationale for the imposter rule is to put the responsibility for determining the true identity of the payee on the drawer or maker of a negotiable instrument.

Chang gives a promissory note to Rahim. Rahim indorses it and negotiates it to John, who indorses it and negotiates it to Andy. Which of the following statements is true of this scenario?

Conversion of an instrument:

If a person has been so negligent in writing or signing a negotiable instrument that he in effect invites an alteration of an unauthorized signature on it, Article 3 of the Uniform Commercial Code (UCC) nevertheless allows her to use the alteration or lack of authorization as a reason for not paying a person who in good faith pays the instrument or takes it for value.

"Responsibility" with respect to instruments means the authority to:

A holder in due course may discharge the liability of the parties to the instrument by:

Contractual liability on negotiable instruments flows from:

Define the situations that lead to the dishonoring of a note by the maker.

Anne borrows $2,000 from Jerry and gives him a promissory note for $2,000 at 10 percent annual interest payable in 100 days. Jerry indorses the note "Pay to the order of Ethan" and negotiates the note to Ethan. At the end of 100 days, Ethan takes the note to Anne. Under these circumstances, if Anne _____.

Peter draws a check on his account at Wright Bank payable to the order of Stella. Peter asks Wright Bank to certify the check and the bank certifies it. Stella presents the check to Wright Bank for payment. Which of the following statements is true of this case?

When a representative signs an authorized signature to an instrument, then the representative is not bound provided the signature shows unambiguously that the signature was made on behalf of the represented person who is named in the instrument.