Question 1

An unauthorized signature binds the person whose name is forged.

Accepted Answer

A) True 
 B)False

Question 2

If the holder of an instrument strikes out the names of several of the in?dorsers, any liability those parties had on the instrument is canceled.

Accepted Answer

A) True 
 B)False

Question 3

Fact Pattern 26-1A 
Roy writes a check on his account at State Bank to Teri to pay a debt. Teri negotiates the check by indorsement to Uma, who presents it for payment to Vital Bank.
-Refer to Fact Pattern 26-1A. If State Bank dishonors the check, Uma can obtain payment from Teri

Accepted Answer

A)  if Uma timely notifies Teri. 
B)  only if Roy refuses to pay the check. 
C)  under any circumstances. 
D)  under no circumstances.

Question 4

A drawer who is induced by an imposter to issue a check in the name of an impersonated payee can avoid payment on the check to an innocent holder.

Accepted Answer

A) True 
 B)False

Question 5

To properly present a draft for payment, the holder must present it to the drawee.

Accepted Answer

A) True 
 B)False

Question 6

State Bank receives a check drawn by Tricia. The check is re?ceived af?ter the established "cutoff" hour. Payment can be postponed without dishonor

Accepted Answer

A)  indefinitely. 
B)  under no circumstances. 
C)  unless Tricia personally demands acceptance. 
D)  until the close of the next business day.

Question 7

Pritty Products sells shoddy goods to consumers for promissory notes, and sells the notes to Quik Finanz Company. Pritty Products goes out of busi?ness. The con?sumers may be able to avoid payment on the notes under

Accepted Answer

A)  Article V of the U.S. Constitution. 
B)  FTC Rule 433. 
C)  the shelter principle. 
D)  UCC Article 3.

Question 8

Ethel signs a note "payable to the order of Fidelity Bank." Fidelity indorses the note in blank and negotiates it to Ghani, who sells it to Huck. Liability associated with the transfer of the note from Ghani to Huck is

Accepted Answer

A)  fitness. 
B)  quality. 
C)  signature. 
D)  warranty.

Question 9

An authorized agent may be personally liable on an instrument if the agent signs the agent's name but not the principal's name.

Accepted Answer

A) True 
 B)False

Question 10

A drawer's liability does not arise until presentment and notice of dishonor.

Accepted Answer

A) True 
 B)False

Question 11

Kip is Lulu's agent and is authorized to write checks on Lulu's account in Metro Bank. Kip writes a check "pay to the order of Nemo." Kip signs the check "Lulu, by Kip, agent." If Metro Bank dishonors the check, liability extends to

Accepted Answer

A)  Kip and Lulu. 
B)  Kip only. 
C)  Lulu only. 
D)  no one.

Question 12

When a party that is pri?marily liable on an instrument pays to a holder the amount due in full, all parties to the instrument are discharged.

Accepted Answer

A) True 
 B)False

Question 13

Under the UCC, a fictitious payee's indorsement is treated as a forgery.

Accepted Answer

A) True 
 B)False

Question 14

Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment, Biff's liability on this note is

Accepted Answer

A)  lateral. 
B)  primary. 
C)  secondary. 
D)  tertiary.

Question 15

Personal defenses defeat the claims of HDCs.

Accepted Answer

A) True 
 B)False

Question 16

Ian transfers a note, for consideration, to Jock by blank indorsement and delivery. Jock transfers the note to Kelly, who takes it in good faith. What does Ian warrant to Kelly?

Accepted Answer

The answer of Ian transfers a note, for consideration, to...

Question 17

Ed acquires a check drawn on First National Bank. To present the check for payment, he may use any commercially reasonable

Accepted Answer

A)  electronic or written means of communication only. 
B)  oral or written means of communication only. 
C)  electronic, oral, or written means of communication. 
D)  written means of communication only.

Question 18

Fact Pattern 26-1A 
Roy writes a check on his account at State Bank to Teri to pay a debt. Teri negotiates the check by indorsement to Uma, who presents it for payment to Vital Bank.
-Refer to Fact Pattern 26-1A. Teri is

Accepted Answer

A)  not liable for payment under any circumstances. 
B)  primarily liable. 
C)  secondarily liable. 
D)  simultaneously liable.

Question 19

Cole issues a note "payable to the order of Cole," forges Dylan's signature as the maker, and indorses the note "pay to Eton." Cole sells the note to Eton, who negotiates it by indorsement and delivery to Franz. Franz negotiates the note to Gert. On this note, Gert can extend liability to

Accepted Answer

A)  no one. 
B)  only Cole, Eton, or Franz. 
C)  only Eton or Franz. 
D)  only Franz.

Question 20

Dishonor occurs if payment of an instrument is refused despite proper and timely presentment.

Accepted Answer

A) True 
 B)False

Exam 26: Liability, Defenses, and Discharge

An unauthorized signature binds the person whose name is forged.

If the holder of an instrument strikes out the names of several of the in?dorsers, any liability those parties had on the instrument is canceled.

Fact Pattern 26-1A Roy writes a check on his account at State Bank to Teri to pay a debt. Teri negotiates the check by indorsement to Uma, who presents it for payment to Vital Bank. -Refer to Fact Pattern 26-1A. If State Bank dishonors the check, Uma can obtain payment from Teri

A drawer who is induced by an imposter to issue a check in the name of an impersonated payee can avoid payment on the check to an innocent holder.

To properly present a draft for payment, the holder must present it to the drawee.

State Bank receives a check drawn by Tricia. The check is re?ceived af?ter the established "cutoff" hour. Payment can be postponed without dishonor

Pritty Products sells shoddy goods to consumers for promissory notes, and sells the notes to Quik Finanz Company. Pritty Products goes out of busi?ness. The con?sumers may be able to avoid payment on the notes under

Ethel signs a note "payable to the order of Fidelity Bank." Fidelity indorses the note in blank and negotiates it to Ghani, who sells it to Huck. Liability associated with the transfer of the note from Ghani to Huck is

An authorized agent may be personally liable on an instrument if the agent signs the agent's name but not the principal's name.

A drawer's liability does not arise until presentment and notice of dishonor.

Kip is Lulu's agent and is authorized to write checks on Lulu's account in Metro Bank. Kip writes a check "pay to the order of Nemo." Kip signs the check "Lulu, by Kip, agent." If Metro Bank dishonors the check, liability extends to

When a party that is pri?marily liable on an instrument pays to a holder the amount due in full, all parties to the instrument are discharged.

Under the UCC, a fictitious payee's indorsement is treated as a forgery.

Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment, Biff's liability on this note is

Personal defenses defeat the claims of HDCs.

Ian transfers a note, for consideration, to Jock by blank indorsement and delivery. Jock transfers the note to Kelly, who takes it in good faith. What does Ian warrant to Kelly?

Ed acquires a check drawn on First National Bank. To present the check for payment, he may use any commercially reasonable

Fact Pattern 26-1A Roy writes a check on his account at State Bank to Teri to pay a debt. Teri negotiates the check by indorsement to Uma, who presents it for payment to Vital Bank. -Refer to Fact Pattern 26-1A. Teri is

Cole issues a note "payable to the order of Cole," forges Dylan's signature as the maker, and indorses the note "pay to Eton." Cole sells the note to Eton, who negotiates it by indorsement and delivery to Franz. Franz negotiates the note to Gert. On this note, Gert can extend liability to

Dishonor occurs if payment of an instrument is refused despite proper and timely presentment.