Question 1

The words "without recourse" on an indorsement means the indorser is:

Accepted Answer

A) liable personally,but not other parties. 
B) not liable for any problems associated with the instrument. 
C) not liable if the instrument is dishonored. 
D) liable for only up to fifty per cent of the loss. 
A) liable personally,but not other parties. 
B) not liable for any problems associated with the instrument. 
C) not liable if the instrument is dishonored. 
D) liable for only up to fifty per cent of the loss. C

Question 2

Since Boise Bank's decision is "without recourse," Boise Bank must notify Joe by midnight of the next banking day.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is true of warranties by indorsers?

Accepted Answer

A) The indorser is not entitled to enforce the instrument. 
B) The indorser warrants that the instrument is subject to a defense of any party that can be asserted against the indorser. 
C) The indorser warrants that he or she has knowledge of the bankruptcy of the maker,acceptor,or drawer. 
D) The indorser warrants that there has been no alteration or other irregularity. 
A) The indorser is not entitled to enforce the instrument. 
B) The indorser warrants that the instrument is subject to a defense of any party that can be asserted against the indorser. 
C) The indorser warrants that he or she has knowledge of the bankruptcy of the maker,acceptor,or drawer. 
D) The indorser warrants that there has been no alteration or other irregularity. D

Question 4

If a drawee refuses to pay an unaccepted draft,the draft is dishonored,and the drawee becomes liable for refusing to pay it.

Accepted Answer

A) True 
 B)False

Question 5

A blank indorsement should be used:

Accepted Answer

A) only for the purpose of deposit or collection. 
B) to impose warranty liability on the maker. 
C) to reserve more space for other indorsements. 
D) only in limited situations. 
A) only for the purpose of deposit or collection. 
B) to impose warranty liability on the maker. 
C) to reserve more space for other indorsements. 
D) only in limited situations.

Question 6

An instrument containing an acknowledgment that a bank has received a sum of money and a promise by the bank to repay the sum of money is called a(n):

Accepted Answer

A) installment note. 
B) certificate of deposit. 
C) promissory note. 
D) certificate of demand. 
A) installment note. 
B) certificate of deposit. 
C) promissory note. 
D) certificate of demand.

Question 7

Ownership of a check is transferred by indorsement by the maker.

Accepted Answer

A) True 
 B)False

Question 8

Elke intends to sign a contract with Acme Gravel Co.If,while signing the contract,she transfers all her rights under the contract to Emmett Sand and Gravel Inc,she has legally assigned all her rights in the contract.

Accepted Answer

A) True 
 B)False

Question 9

A draft (or bill of exchange)is a written promise by the maker to pay money to the order of another party,called the payee.

Accepted Answer

A) True 
 B)False

Question 10

Discuss if the following instrument is negotiable:
"Ninety days after today,I promise to pay Sarah J.two thousand dollars."
Signed: Peter K.

Accepted Answer

Yes,the instrument is written,signed by

Question 11

A negotiable instrument is an agreement by the maker that contains a fixed amount of money on demand or at a definite time to the bearer or to order.

Accepted Answer

A) True 
 B)False

Question 12

Donna is the holder of a note that has been indorsed so many times that there is no space left on the back of the note for indorsements.Donna wants to transfer the note for $200 to Acme Finance,but wants to indorse on the face of the note "without recourse,Donna ".Acme wants to staple a sheet of blank paper to the note and have Donna simply sign "Donna" there.Discuss whether Donna or Acme is correct concerning the location of Donna's signature and if Donna is legally entitled to indorse "without recourse."

Accepted Answer

Indorsements may either be made on an al

Question 13

A check that a drawee bank guarantees will be paid to the holder is a:

Accepted Answer

A) bank draft. 
B) traveler's check. 
C) certified check. 
D) treasurer's check. 
A) bank draft. 
B) traveler's check. 
C) certified check. 
D) treasurer's check.

Question 14

Sam gives a check to Tina who indorses it over to Amanda.Amanda is called the holder in due course.

Accepted Answer

A) True 
 B)False

Question 15

An envelope containing a $10 rebate check was placed in Hart's mailbox by mistake.It was addressed to Rice,a former tenant,and read,"Pay to the bearer or G.Rice,$10.00." Discuss Hart's role.

Accepted Answer

Hart is the holder of the check.A holder

Question 16

Through what kind of written instrument would Tim direct Howard to pay $600 to the order of Celeste?

Accepted Answer

A) A certificate of deposit 
B) A note 
C) A draft 
D) A dishonored draft 
A) A certificate of deposit 
B) A note 
C) A draft 
D) A dishonored draft

Question 17

The first set of numbers on a printed check at the lower left-hand corner is the customer's bank account number at the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 18

If Daphne gave value for and cashes Lisa's check,what legal rights,if any,does Daphne have?

Accepted Answer

A) Daphne may insist upon an unqualified indorsement. 
B) Daphne may not insist upon any particular type of indorsement. 
C) Daphne may insist upon both an unqualified indorsement and a restrictive indorsement. 
D) Daphne may insist upon an unqualified,restrictive and special indorsement. 
A) Daphne may insist upon an unqualified indorsement. 
B) Daphne may not insist upon any particular type of indorsement. 
C) Daphne may insist upon both an unqualified indorsement and a restrictive indorsement. 
D) Daphne may insist upon an unqualified,restrictive and special indorsement.

Question 19

The most common type of draft in use today is the bank draft.

Accepted Answer

A) True 
 B)False

Question 20

If a drawee refuses to pay the instrument,it is said to be:

Accepted Answer

A) delayed. 
B) dishonored. 
C) detained. 
D) defaulted. 
A) delayed. 
B) dishonored. 
C) detained. 
D) defaulted.

Exam 16: The Nature of Negotiable Instruments

The words "without recourse" on an indorsement means the indorser is:

Since Boise Bank's decision is "without recourse," Boise Bank must notify Joe by midnight of the next banking day.

Which of the following is true of warranties by indorsers?

If a drawee refuses to pay an unaccepted draft,the draft is dishonored,and the drawee becomes liable for refusing to pay it.

A blank indorsement should be used:

An instrument containing an acknowledgment that a bank has received a sum of money and a promise by the bank to repay the sum of money is called a(n):

Ownership of a check is transferred by indorsement by the maker.

Elke intends to sign a contract with Acme Gravel Co.If,while signing the contract,she transfers all her rights under the contract to Emmett Sand and Gravel Inc,she has legally assigned all her rights in the contract.

A draft (or bill of exchange)is a written promise by the maker to pay money to the order of another party,called the payee.

Discuss if the following instrument is negotiable: "Ninety days after today,I promise to pay Sarah J.two thousand dollars." Signed: Peter K.

A negotiable instrument is an agreement by the maker that contains a fixed amount of money on demand or at a definite time to the bearer or to order.

A check that a drawee bank guarantees will be paid to the holder is a:

Sam gives a check to Tina who indorses it over to Amanda.Amanda is called the holder in due course.

An envelope containing a $10 rebate check was placed in Hart's mailbox by mistake.It was addressed to Rice,a former tenant,and read,"Pay to the bearer or G.Rice,$10.00." Discuss Hart's role.

Through what kind of written instrument would Tim direct Howard to pay $600 to the order of Celeste?

The first set of numbers on a printed check at the lower left-hand corner is the customer's bank account number at the Federal Reserve.

If Daphne gave value for and cashes Lisa's check,what legal rights,if any,does Daphne have?

The most common type of draft in use today is the bank draft.

If a drawee refuses to pay the instrument,it is said to be:

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