Question 1

Which one of the following is a similarity between bearer paper and order paper?

Accepted Answer

A) both require a specific payee to be named 
B) both require indorsements to be considered negotiable 
C) both require delivery to be considered negotiable 
D) both can be claimed by whoever presents the instrument for payment 
A) both require a specific payee to be named 
B) both require indorsements to be considered negotiable 
C) both require delivery to be considered negotiable 
D) both can be claimed by whoever presents the instrument for payment

Question 2

A holder can convert a blank indorsement into a special indorsement by adding his or signature on it.

Accepted Answer

A) True 
 B)False

Question 3

An indorser is allowed to indorse an instrument so as to make the indorsee his collecting agent.

Accepted Answer

A) True 
 B)False

Question 4

A(n)________ is an indorsement that states that it is for the benefit or use of the indorser or another person.

Accepted Answer

A) indorsement in trust 
B) indorsement for deposit 
C) indorsement prohibiting further indorsement 
D) indorsement for collection 
A) indorsement in trust 
B) indorsement for deposit 
C) indorsement prohibiting further indorsement 
D) indorsement for collection

Question 5

Which of the following is true about an assignment?

Accepted Answer

A) It is considered as a negotiation under Article 3 of the UCC. 
B) The transferee is known as a holder in due course. 
C) Defenses against the transferor can be raised against the transferee. 
D) Only negotiable instruments can become assignments. 
A) It is considered as a negotiation under Article 3 of the UCC. 
B) The transferee is known as a holder in due course. 
C) Defenses against the transferor can be raised against the transferee. 
D) Only negotiable instruments can become assignments.

Question 6

Which of the following is true about an allonge?

Accepted Answer

A) It must contain the name of a the payee to be valid. 
B) It must be accepted by the payee to be valid. 
C) It must be affixed to the indorsement. 
D) It must be provided only on demand. 
A) It must contain the name of a the payee to be valid. 
B) It must be accepted by the payee to be valid. 
C) It must be affixed to the indorsement. 
D) It must be provided only on demand.

Question 7

A qualified indorsement puts limited liability on the indorser.

Accepted Answer

A) True 
 B)False

Question 8

Only a holder in due course can legally negotiate commercial paper.

Accepted Answer

A) True 
 B)False

Question 9

A(n)________ is a signature and other directions written by or on behalf of the holder somewhere on an instrument.

Accepted Answer

A) recommendation 
B) assignment 
C) indorsement 
D) reference 
A) recommendation 
B) assignment 
C) indorsement 
D) reference

Question 10

Which of the following can be claimed by merely having possession of the instrument?

Accepted Answer

A) a certificate of deposit 
B) an allonge 
C) an order instrument 
D) a bearer instrument 
A) a certificate of deposit 
B) an allonge 
C) an order instrument 
D) a bearer instrument

Question 11

Unqualified indorsements are considered negotiable instruments.

Accepted Answer

A) True 
 B)False

Question 12

A special indorsement does not specify to whom the indorser intends the instrument to be payable.

Accepted Answer

A) True 
 B)False

Question 13

An instrument containing a qualified indorsement can be further negotiated.

Accepted Answer

A) True 
 B)False

Question 14

Which one of the following would be a legitimate method to convert an order paper to a bearer paper?

Accepted Answer

A) by indorsement 
B) by adding the term "pay to the order of" 
C) by delivering the order paper 
D) by specifying a payee 
A) by indorsement 
B) by adding the term "pay to the order of" 
C) by delivering the order paper 
D) by specifying a payee

Question 15

A person who takes a negotiable instrument for value, in good faith, and without notice that it is defective or overdue is referred to as a(n)________.

Accepted Answer

A) holder 
B) holder in due course 
C) unqualified indorser 
D) assignee 
A) holder 
B) holder in due course 
C) unqualified indorser 
D) assignee

Question 16

An indorsee who accepts a defective instrument qualifies as a holder in due course.

Accepted Answer

A) True 
 B)False

Question 17

An instrument that is not payable to a specific payee or indorsee is known as a ________.

Accepted Answer

A) order paper 
B) bearer paper 
C) allonge 
D) draft 
A) order paper 
B) bearer paper 
C) allonge 
D) draft

Question 18

An order paper that is indorsed in blank becomes bearer paper.

Accepted Answer

A) True 
 B)False

Question 19

The good faith test applies to both transferor and transferee.

Accepted Answer

A) True 
 B)False

Question 20

Give an account of the transfer of nonnegotiable contracts by assignment.

Accepted Answer

An assignment is the transfer of rights

Exam 23: Holder in Due Course and Transferability

Which one of the following is a similarity between bearer paper and order paper?

A holder can convert a blank indorsement into a special indorsement by adding his or signature on it.

An indorser is allowed to indorse an instrument so as to make the indorsee his collecting agent.

A(n)________ is an indorsement that states that it is for the benefit or use of the indorser or another person.

Which of the following is true about an assignment?

Which of the following is true about an allonge?

A qualified indorsement puts limited liability on the indorser.

Only a holder in due course can legally negotiate commercial paper.

A(n)________ is a signature and other directions written by or on behalf of the holder somewhere on an instrument.

Which of the following can be claimed by merely having possession of the instrument?

Unqualified indorsements are considered negotiable instruments.

A special indorsement does not specify to whom the indorser intends the instrument to be payable.

An instrument containing a qualified indorsement can be further negotiated.

Which one of the following would be a legitimate method to convert an order paper to a bearer paper?

A person who takes a negotiable instrument for value, in good faith, and without notice that it is defective or overdue is referred to as a(n)________.

An indorsee who accepts a defective instrument qualifies as a holder in due course.

An instrument that is not payable to a specific payee or indorsee is known as a ________.

An order paper that is indorsed in blank becomes bearer paper.

The good faith test applies to both transferor and transferee.

Give an account of the transfer of nonnegotiable contracts by assignment.

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