Exam 21: Holder in Due Course and Liability of Parties

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 ________.

Mark acquires an instrument from a stranger under suspicious circumstances and at a high discount.This disqualifies him from acquiring HDC status because he did not ________.

Where an indorsement on an instrument has been forged or is unauthorized,the loss falls on the party who first takes the forged instrument after the forgery.Discuss,with an example,a circumstance when this rule is not applicable.

A check is an order from a drawer to a drawee to pay the instrument to a payee according to its terms.

A drawee that refuses to pay a draft or a check is liable to the payee or holder.

What is the similarity between the fictitious payee rule and the imposter rule?

Susan purchases goods by telephone from Parker.Susan has never met Parker.Brenton goes to Susan and pretends to be Parker.Susan draws a check payable to the order of Parker and gives the check to Brenton,believing him to be Parker.Brenton forges Parker's indorsement and indorses the check to his brother,William,with the term "without recourse." William then cashes the check at a liquor store.Under the imposter rule,who is liable on the check?

Which of the following is a rule that eliminates HDC status with regard to negotiable instruments that arise out of certain consumer credit transactions?

Which of the following requirements has to be met for a holder to qualify as an HDC under the shelter principle?

Calvin,a college student,wants to purchase an automobile on credit from Irontilt Motors.He does not have sufficient income or the credit history to justify the extension of credit to him alone.Calvin asks his father to cosign a note to Irontilt Motors,which his father agrees to.What role does Calvin's father fulfill here so that Calvin can buy the car?

Arnold draws a check payable to the order of Matthew.Linda steals the check from Matthew,forges Matthew's indorsement,and cashes the check at a liquor store.Who is liable and why?

The fictitious payee rule states that if an imposter forges the indorsement of the named payee,the drawer or maker is liable on the instrument to any person who,in good faith,pays the instrument or takes it for value or for collection.

Calvin,a college student,wants to purchase an automobile on credit from Irontilt Motors.He does not have sufficient income or the credit history to justify the extension of credit to him alone.Calvin asks his father to cosign a note to Irontilt Motors,which his father agrees to.What kind of liability does Calvin's father come under?

Where an indorsement on an instrument has been forged or is unauthorized,the loss falls on the party who first takes the forged instrument after the forgery.

A transferor acquires greater rights than a holder in due course.

A check is accepted when it is certified by a bank.

The ________ states that a drawer or maker is liable on a forged or unauthorized indorsement if the person signing as or on behalf of a drawer or maker intends the named payee to have no interest in the instrument or when the person identified as the payee is a fabricated person.

A person who authorizes an agent to sign a negotiable instrument on his or her behalf is known as a(n)________.

A(n)________ defense is a type of defense that can be raised against enforcement of a negotiable instrument by an ordinary holder,but not against an HDC.

________ is a type of personal defense where a person is wrongfully influenced or threatened to enter into a negotiable instrument.