Exam 24: Liability, Defenses, and Discharge

In which of the following conditions is a drawee primarily liable to a draft?

A presentment is a demand for the acceptance of a dishonored instrument.

Liability on a negotiable instrument that is imposed on a party only when the party primarily liable on the instrument defaults and fails to pay the instrument when due is referred to as ________.

What are the requirements for imposing secondary liability?

Stanley, who owes Milton money, indorses a draft to him with the term "without recourse." The instrument later is dishonored.What liability does Stanley have on the instrument?

Discharge of an instrument by payment can be raised against enforcement of a negotiable instrument by an ordinary holder.

________ is a type of personal defense where a wrongdoer makes a false statement or misrepresentation to another person to lead that person to enter into a contract with the wrongdoer.

Jennifer signs a promissory note to pay $2, 500 to Clara.Clara negotiates the instrument and indorses it to Anthony.Anthony alters the note to make the payment amount $25, 000 and negotiates the note to Nicholas.Nicholas indorses the note and negotiates it to Mack.Nicholas and Mack are both unaware of the alteration done by Anthony. -If Mack presents the note to Jennifer for payment, how much, if anything is Jennifer obligated to pay?

The imposter rule does not apply for the wrongdoer who poses as the agent of the payee.

A person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on it.

Martha draws a check payable to the order of Stella. Stella indorses the check to Karen. But Leslie steals the check from Karen, forges Karen's indorsement, and cashes the check at a liquor store. -Who is liable to the check?

Marks used in lieu of a written signature cannot be used on indorsements.

Martha draws a check payable to the order of Stella. Stella indorses the check to Karen. But Leslie steals the check from Karen, forges Karen's indorsement, and cashes the check at a liquor store. -When the forgery is exposed, who can the liquor store legally recover from?

An unqualified indorser has secondary liability on negotiable instruments.

An instrument is not considered canceled if it is destroyed or mutilated by accident or by an unauthorized third party.

An agent is only liable to the instrument that he or she signs in if it clearly mentions the principal.

That "all signatures are genuine or authorized" is a transfer warranty that a transferor of a negotiable instrument for consideration makes.

A check is only accepted once it has been verified by the bank.

Liability in which a person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on the instrument is referred to as ________.

A qualified indorser cannot disclaim transfer warranties.