Question 1

Notice of dishonor of an instrument:

Accepted Answer

A)   may be given orally.
B)   must be given by returning the unpaid instrument with an attached stamp,ticket,or memorandum stating that the item was not paid.
C)   must meet formal requirements to be effective.
D)   must be in writing. A

Question 2

Dan signs a note "Dan Mason,Agent" without disclosing his principal's name.Dan is liable to a holder in due course without notice that Dan was not intended to be liable.

Accepted Answer

A) True 
 B)False  True

Question 3

A drawee bank is primarily liable after it accepts the check.

Accepted Answer

A) True 
 B)False  True

Question 4

Zoron Company purchased a truck from Ace Motors.The sales personnel at Ace know that Anton Green is an executive at Zoron.To pay for the truck,Anton delivered a $35,000 note to Ace and signed it "Anton Green,Agent." In this case:

Accepted Answer

A)   the signature of the maker is incomplete.Neither Zoron nor Anton is liable on the note.
B)   "Zoron Company" does not appear on the note.Only Anton is liable to Ace for payment of the note.
C)   as long as Ace Motors remains holder of the note,Zoron Company is liable for payment.
D)   if ABC Bank is holder of the note and Zoron Company does not pay,the bank has no recourse against Anton.

Question 5

Presenters' warranties are exactly the same as transferors' warranties.

Accepted Answer

A) True 
 B)False

Question 6

Tanika has a checking account at First Bank.Orrin steals one of her blank checks,writes a check for $250,and then forges Tanika's signature.He then presents the check to First Bank for payment.First Bank pays the forged instrument.Which of the following statements is correct?

Accepted Answer

A)   First Bank will have to recredit the $250 to Tanikas account,but they can collect from Orrin if they can find him and he has the money.
B)   First Bank will have to recredit the $250 to Tanika's account,but only if they can collect the $250 from Orrin.
C)   Tanika is primarily liable on the check even if she did not sign it and was not negligent in allowing Orrin to take the blank check.
D)   First Bank is liable only if they have a signature card on file for Tanika.

Question 7

Thomas is the treasurer of Padgett,Inc.He has authority to sign on behalf of the company.One day,he signs a note as follows: "Thomas Seggway,as treasurer." The company's name does not appear on the note.Is the company liable on the note? Is Thomas liable on the note? Explain.

Accepted Answer

The answer of Thomas is the treasurer of Padgett,Inc.He has...

Question 8

A drawee bank "accepts" a check by certification.

Accepted Answer

A) True 
 B)False

Question 9

Brad wrote a check to Clara for $1,000 on his account at First Bank.He then took it to his bank for certification.The bank wrote "certified" on the face of the check.Brad then gave the check to Clara.When Clara took the check to First Bank,they refused to pay,claiming that there was not enough money in Brad's account to cover the check.Which of the following is correct?

Accepted Answer

A)   First Bank is primarily liable on the check,because it has already accepted it.
B)   Clara has no recourse under the circumstances.
C)   Brad must pay Clara $1,000.
D)   First Bank must reimburse Brad for the $1,000.

Question 10

A check is dishonored if:

Accepted Answer

A)   it is presented for payment directly to the payor/drawee bank for immediate payment,which is refused.
B)   a payor bank makes timely return of the check.
C)   the payor bank becomes accountable for the amount of the check but has not yet made payment.
D)   All of these.

Question 11

Zelda signs a note for $500 to First Bank.If,at the request of both Zelda and the Bank,Ann also signs the note as an accommodation maker:

Accepted Answer

A)   Zelda is primarily liable on the note;Ann has secondary liability on the note.
B)   Ann is primarily liable on the note;Zelda has secondary liability on the note.
C)   Ann has primary liability on the note;no one has secondary liability.
D)   Zelda is primarily liable on the note;no one has secondary liability.

Question 12

In the banking system,the time for dishonor of a check can vary greatly depending on the number of banks involved in the collection process.

Accepted Answer

A) True 
 B)False

Question 13

A bank must give notice of dishonor within one business day and a nonbank within three business days of the day on which it receives notice of dishonor.

Accepted Answer

A) True 
 B)False

Question 14

Elliot's payroll check was made payable "to the order of Elliot Lewis." Elliot deposited the check in Union Trust bank but never indorsed it.Elliot has no warranty liability on the check because his signature is not on the instrument.

Accepted Answer

A) True 
 B)False

Question 15

Failure to give notice of dishonor will discharge the drawer from having to pay on the instrument.

Accepted Answer

A) True 
 B)False

Question 16

William draws a check on City Bank payable to the order of Tara.Tara indorses it to Rebecca.Rebecca deposits it to her account in Town Bank.Town Bank properly presents it to City Bank,the drawee.City Bank dishonors it because William did not have enough funds on deposit to cover the check.In this case:

Accepted Answer

A)   William is discharged from liability only if he fails to receive notice of dishonor.
B)   City Bank has until midnight of the following day to notify Town Bank,Rebecca,or Tara of the dishonor.
C)   if Town Bank received notice of dishonor on Monday,it would have until midnight on Wednesday to notify Tara or Rebecca.
D)   Rebecca has until midnight of the following day after receipt of notice of dishonor to notify Tara.

Question 17

Discharge of liability on an instrument is final;it cannot be revived.

Accepted Answer

A) True 
 B)False

Question 18

Paolo took a check written by Jack to Jack's bank to be certified.The bank stamped "Certified" on it and gave it back to Paolo.What consequence?

Accepted Answer

A)   Paolo can only demand the money from Jack.
B)   The bank is now primarily liable on the check.
C)   The bank would have to pay if Jack doesn't.
D)   Paolo would have to pay if the bank doesn't.

Question 19

Presentment for payment is one step necessary to charge an indorser with the obligation to pay.

Accepted Answer

A) True 
 B)False

Question 20

Presentment is a condition to the holder's right to recover from parties with primary liability.

Accepted Answer

A) True 
 B)False

Exam 28: Liability of Parties

Notice of dishonor of an instrument:

Dan signs a note "Dan Mason,Agent" without disclosing his principal's name.Dan is liable to a holder in due course without notice that Dan was not intended to be liable.

A drawee bank is primarily liable after it accepts the check.

Zoron Company purchased a truck from Ace Motors.The sales personnel at Ace know that Anton Green is an executive at Zoron.To pay for the truck,Anton delivered a $35,000 note to Ace and signed it "Anton Green,Agent." In this case:

Presenters' warranties are exactly the same as transferors' warranties.

Tanika has a checking account at First Bank.Orrin steals one of her blank checks,writes a check for $250,and then forges Tanika's signature.He then presents the check to First Bank for payment.First Bank pays the forged instrument.Which of the following statements is correct?

Thomas is the treasurer of Padgett,Inc.He has authority to sign on behalf of the company.One day,he signs a note as follows: "Thomas Seggway,as treasurer." The company's name does not appear on the note.Is the company liable on the note? Is Thomas liable on the note? Explain.

A drawee bank "accepts" a check by certification.

A check is dishonored if:

Zelda signs a note for $500 to First Bank.If,at the request of both Zelda and the Bank,Ann also signs the note as an accommodation maker:

In the banking system,the time for dishonor of a check can vary greatly depending on the number of banks involved in the collection process.

A bank must give notice of dishonor within one business day and a nonbank within three business days of the day on which it receives notice of dishonor.

Elliot's payroll check was made payable "to the order of Elliot Lewis." Elliot deposited the check in Union Trust bank but never indorsed it.Elliot has no warranty liability on the check because his signature is not on the instrument.

Failure to give notice of dishonor will discharge the drawer from having to pay on the instrument.

Discharge of liability on an instrument is final;it cannot be revived.

Paolo took a check written by Jack to Jack's bank to be certified.The bank stamped "Certified" on it and gave it back to Paolo.What consequence?

Presentment for payment is one step necessary to charge an indorser with the obligation to pay.

Presentment is a condition to the holder's right to recover from parties with primary liability.