Exam 28: Liability of Parties

A check is dishonored if:

Kelly wrote a check to Trish, which Trish immediately changed from $20 to $120. She negotiated the check to Carl for value, who in turn took it to Kelly's bank for certification. Kelly's bank checked his account and certified the check since there were sufficient funds to cover the check. Thereafter, Carl gave the check to Central Motors (CM) as part of the down payment for his car. CM presents the check to Kelly's bank for payment and they discover the alteration. What consequence?

William draws a check on City Bank payable to the order of Tara. Tara indorses it to Rebecca. Rebecca deposits it to her account in Town Bank. Town Bank properly presents it to City Bank, the drawee. City Bank dishonors it because William did not have enough funds on deposit to cover the check. In this case:

In which of the following situations has conversion NOT occurred?

A time draft presented for payment is due on the due date or presentment date, whichever is later.

Sarah has a checking account at First Bank. Orrin steals one of her blank checks, writes a check for $250, and then forges Sarah's signature. He then presents the check to First Bank for payment. First Bank pays the forged instrument. Which of the following statements is correct?

Which of the following is a warranty of the transferor?

Dan signs a note "Dan Mason, Agent" without disclosing his principal's name. Dan is liable to a holder in due course without notice that Dan was not intended to be liable.

An accommodation party will always be secondarily liable on an instrument.

A party liable on an instrument who makes proper tender of full payment to a person entitled to enforce the instrument is discharged from liability for the face amount of the instrument and for any interest accrued even if the tender is refused.

Which of the following is unconditionally liable on a draft or check as issued?

When a draft is accepted by a bank, prior and subsequent indorsers are discharged.

Presentment is a condition to the holder's right to recover from parties with primary liability.

Who is primarily liable on a note?

An accommodation maker is not liable on a note since he only agreed to sign as a favor to the maker.

The use of the qualifying word(s) a. "accepted" b. "certified" c. "without recourse" d. "insufficient funds"

Sarah has a checking account at First Bank. Orrin steals one of her blank checks, writes a check for $250 to himself, and then forges Sarah's signature. Orrin then indorses the instrument to Paul in payment of a debt. Paul, not realizing Orrin has forged Sarah's signature, presents the instrument to First Bank for payment. At First Bank's request, Paul indorses the instrument, and the bank then pays him $250. Which of the following is correct?

_{48. A(n) signs an instrument to lend his credit to an instrument, and his liability is determined by the capacity in} Which he signs.

Mary Lou takes her paycheck to Al's Place on Friday night and gives it to the bartender as payment for her running bar bill. If the company she works for goes bankrupt the following Monday, Mary Lou is liable for breach of warranty of no insolvency.

Presentment for payment is excused if the person entitled to enforce the instrument cannot with reasonable diligence present the instrument.