Exam 24: Liability,Defenses and Discharge

An accommodation party that signs an instrument guaranteeing payment is ________ on the instrument.

Drawers of checks and drafts and unqualified indorsers are secondarily liable on negotiable instruments.

What is the consequence of a defense to a negotiable instrument being a personal defense?

Unqualified indorsers must pay any dishonored instrument to the holder or to any subsequent according to its terms,when issued or properly completed.

Someone can have warranty liability on an instrument without having signed it.

Terry has a business in which he visits with client's pet cats in the client's home while the client is out of town.The primary purpose is to prevent the cats from becoming psychotic due to the owner's absence.Terry contracted to visit Valerie's cat daily for a 2-week period when Valerie was on vacation.Because Terry charged by the hour,Valerie gave Terry a signed check with the amount blank for Terry to fill in based on $10 per hour.While visiting with Valerie's cat,Terry noticed a check on Valerie's desk that had the amount of $100 filled in,but no payee and no signature.Terry took the check,converted the $100 to $1,000 and signed Valerie's name.Terry then filled out the check that Valerie had given him in the amount of $10,000,rather than the $200 he had earned at $10 per hour.Terry transferred both checks to a holder in due course,who later seeks payment from Valerie.How much must Valerie pay on each of these checks?

A qualified indorser will incur secondary,rather than primary,liability.

Before a party can be held secondarily liable on an instrument,that party must have received a timely notice that the instrument was dishonored.

The accommodation indorser is primarily liable on the instrument.

An accommodation party who pays an instrument can recover reimbursement from the accommodated party and enforce the instrument against him or her.

Martha is elderly,does not speak or read English very well,and is unsophisticated in business matters.A salesman convinces her to sign a negotiable note by telling Martha that it is a receipt for his visit.The salesman properly negotiates this note to a holder in due course,who tries to collect from Martha.Martha's defense to this note is:

Stan Johnson is the secretary of Balzene's,Inc.,a small corporation.Before an important meeting with some potential clients,Stan purchases some supplies from a local office supply store.Stan takes one of the company's checks that are imprinted with the company's name to pay for this merchandise.In his rush before the meeting,Stan simply signs the check "Stan Johnson." Which of the following is true in this situation?

What are the two general kinds of implied warranties for which warranty liability can be imposed in connection with a negotiable instrument?

If Royce comes to you and asks what type of personal defenses can he raise against enforcement of a negotiable instrument by an ordinary holder,which of the following would you say qualify as such?

The fact that the Federal Trade Commission has eliminated holder in due course status in connection with consumer credit transactions is a disadvantage for consumers.

Drawers of checks and drafts have secondary liability on the instruments.

Contract liability is another term used to refer to signature liability.

Which of the following would be considered an exception to the rule that the loss from a forged instrument falls on the party who first takes the forged instrument after the forgery?

Certification of a check by the drawee bank makes the bank primarily liable.

Fraud in the inception occurs when a party is tricked into signing a negotiable instrument while thinking he/she is signing something else.