Question 1

Isabel transfers a note, for consideration, to Juliet by blank indorsement and delivery. Juliet transfers the note to Kip, who takes it in good faith. In this situation, Isabel warrants to Kip that​

Accepted Answer

A)  ​he is entitled to enforce the note. 
B)  ​the note has been fully paid. 
C)  ​any defense to payment on the note can be assered against him. 
D)  ​none of the choices.

Question 2

The key to liability on a negotiable instrument is a signature.

Accepted Answer

A) True 
 B)False

Question 3

Gulf Bank receives a check drawn by Hayley. The check is received after the established "cutoff" hour. Payment can be postponed without dishonor​

Accepted Answer

A)  ​indefinitely. 
B)  ​under no circumstances. 
C)  ​for thirty days. 
D)  ​until the following business day.

Question 4

Olivia is Physicians Clinic agent and is not authorized to sign checks or notes on its behalf. Despite the lack of authority, Olivia issues a note "payable to the order of Loan Company [signed] Physicians Clinic, by Olivia." Liability on this note extends to​

Accepted Answer

A)  ​Physicians Clinic. 
B)  ​Olivia. 
C)  ​Loan Company. 
D)  ​no one.

Question 5

A drawer's liability does not arise without notice of dishonor.

Accepted Answer

A) True 
 B)False

Question 6

Curt writes a check on his account at North Bank to Mandy, a famous singer. The person claiming to be Mandy is an imposter, however, named Debra. Debra indorses the check to Portions, a casino, for which North Bank cashes it. Ultimately, the loss will most likely fall on​

Accepted Answer

A)  ​Curt. 
B)  ​North Bank. 
C)  ​Mandy. 
D)  ​Portions.

Question 7

A maker is primarily liable on an instrument.

Accepted Answer

A) True 
 B)False

Question 8

If payment of an instrument cannot be obtained within the prescribed time, dishonor occurs.

Accepted Answer

A) True 
 B)False

Question 9

When there is a breach of an underlying contract for which an instrument was issued, the drawer of a check can order his or her bank to stop payment.

Accepted Answer

A) True 
 B)False

Question 10

A person whose name is forged on an instrument normally has no liability to pay any holder the value of the instrument.

Accepted Answer

A) True 
 B)False

Question 11

A maker is secondarily liable on an instrument.

Accepted Answer

A) True 
 B)False

Question 12

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Accepted Answer

A) True 
 B)False

Question 13

Primary liability on a negotiable instrument is conditional.

Accepted Answer

A) True 
 B)False

Question 14

Celine issues a note "payable to the order of Celine," forges Dash's signature as the maker, and indorses the note "pay to Erica." Celine sells the note to Erica, who negotiates it by indorsement and delivery to Forest. Forest can extend liability to​

Accepted Answer

A)  ​no one. 
B)  ​Celine. 
C)  ​Dash. 
D)  ​all of the parties.

Question 15

Fran signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Holly, who sells it to Iona. Liability associated with the transfer of the note from Holly to Iona is​

Accepted Answer

A)  ​conceptual. 
B)  ​contractual. 
C)  ​signature. 
D)  ​warranty.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Darby writes a check to Education Loan Management, Inc., that is drawn on Darby's account at Federal Bank. If the bank does not accept the check, liability for its amount is on​

Accepted Answer

A)  Darby.​ 
B)  ​Education Loan Management. 
C)  ​Federal Bank. 
D)  ​no one.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Dental Clinic agent Emma is authorized to write checks on the clinic's account in Finance Bank. Pharma Corporation is a clinic supplier. Emma writes a check on the clinc's account "pay to the order of Pharma [signed] Emma," indorses it in Pharma's name, and deposits it in her own account at Third Bank. If the bank collects payment, the ultimate party most likely to suffer the loss is​

Accepted Answer

A)  ​no one. 
B)  ​Dental Clinic. 
C)  ​Finance Bank. 
D)  ​Pharma.

Question 20

Duke signs a note "payable to the order of Equity Bank." Unless Duke has a valid defense against payment, his liability on this note is​

Accepted Answer

A)  ​impaired. 
B)  ​primary. 
C)  ​secondary. 
D)  ​qualified.

Exam 27: Liability, Defenses, and Discharge

Isabel transfers a note, for consideration, to Juliet by blank indorsement and delivery. Juliet transfers the note to Kip, who takes it in good faith. In this situation, Isabel warrants to Kip that​

The key to liability on a negotiable instrument is a signature.

Gulf Bank receives a check drawn by Hayley. The check is received after the established "cutoff" hour. Payment can be postponed without dishonor​

Olivia is Physicians Clinic agent and is not authorized to sign checks or notes on its behalf. Despite the lack of authority, Olivia issues a note "payable to the order of Loan Company [signed] Physicians Clinic, by Olivia." Liability on this note extends to​

A drawer's liability does not arise without notice of dishonor.

Curt writes a check on his account at North Bank to Mandy, a famous singer. The person claiming to be Mandy is an imposter, however, named Debra. Debra indorses the check to Portions, a casino, for which North Bank cashes it. Ultimately, the loss will most likely fall on​

A maker is primarily liable on an instrument.

If payment of an instrument cannot be obtained within the prescribed time, dishonor occurs.

When there is a breach of an underlying contract for which an instrument was issued, the drawer of a check can order his or her bank to stop payment.

A person whose name is forged on an instrument normally has no liability to pay any holder the value of the instrument.

A maker is secondarily liable on an instrument.

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Primary liability on a negotiable instrument is conditional.

Celine issues a note "payable to the order of Celine," forges Dash's signature as the maker, and indorses the note "pay to Erica." Celine sells the note to Erica, who negotiates it by indorsement and delivery to Forest. Forest can extend liability to​

Fran signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Holly, who sells it to Iona. Liability associated with the transfer of the note from Holly to Iona is​

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

Darby writes a check to Education Loan Management, Inc., that is drawn on Darby's account at Federal 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.

Duke signs a note "payable to the order of Equity Bank." Unless Duke has a valid defense against payment, his liability on this note is​

Isabel transfers a note, for consideration, to Juliet by blank indorsement and delivery. Juliet transfers the note to Kip, who takes it in good faith. In this situation, Isabel warrants to Kip that

Gulf Bank receives a check drawn by Hayley. The check is received after the established "cutoff" hour. Payment can be postponed without dishonor

Olivia is Physicians Clinic agent and is not authorized to sign checks or notes on its behalf. Despite the lack of authority, Olivia issues a note "payable to the order of Loan Company [signed] Physicians Clinic, by Olivia." Liability on this note extends to

Curt writes a check on his account at North Bank to Mandy, a famous singer. The person claiming to be Mandy is an imposter, however, named Debra. Debra indorses the check to Portions, a casino, for which North Bank cashes it. Ultimately, the loss will most likely fall on

Celine issues a note "payable to the order of Celine," forges Dash's signature as the maker, and indorses the note "pay to Erica." Celine sells the note to Erica, who negotiates it by indorsement and delivery to Forest. Forest can extend liability to

Fran signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Holly, who sells it to Iona. Liability associated with the transfer of the note from Holly to Iona is

Darby writes a check to Education Loan Management, Inc., that is drawn on Darby's account at Federal Bank. If the bank does not accept the check, liability for its amount is on

Duke signs a note "payable to the order of Equity Bank." Unless Duke has a valid defense against payment, his liability on this note is