Question 1

A blank indorsement converts order paper to bearer paper and leaves bearer paper as bearer paper.

Accepted Answer

A) True 
 B)False

Question 2

An indorsement limiting payment to a particular person is effective.

Accepted Answer

A) True 
 B)False

Question 3

A bank "gives value" when it allows a depositor to withdraw funds against a deposited item.

Accepted Answer

A) True 
 B)False

Question 4

Every indorsement is either blank or special.

Accepted Answer

A) True 
 B)False

Question 5

The transfer of a nonnegotiable promise or order operates as an assignment.

Accepted Answer

A) True 
 B)False

Question 6

Cynthia Todd is the holder of a check with the indorsement "Adam Brock." To protect herself, Cynthia may:

Accepted Answer

A)  convert the special indorsement to a blank indorsement. 
B)  convert the special indorsement to a qualified indorsement. 
C)  write above Adam's signature, "Pay Cynthia Todd." 
D)  not convert the indorsements, but could only protect her interest in the check by depositing it in her account as soon as possible. 
A)  convert the special indorsement to a blank indorsement. 
B)  convert the special indorsement to a qualified indorsement. 
C)  write above Adam's signature, "Pay Cynthia Todd." 
D)  not convert the indorsements, but could only protect her interest in the check by depositing it in her account as soon as possible.

Question 7

Which of the following is a special unqualified indorsement?

Accepted Answer

A)  Pay to the order of John Doe, without recourse 
B)  For deposit only, John Jones 
C)  Without recourse, Sandra Adams 
D)  Pay to the order of April Smith 
A)  Pay to the order of John Doe, without recourse 
B)  For deposit only, John Jones 
C)  Without recourse, Sandra Adams 
D)  Pay to the order of April Smith

Question 8

Real defenses include all but which of the following?

Accepted Answer

A)  Forgery of instrument 
B)  Minority of maker 
C)  Material alteration 
D)  Theft of bearer paper 
A)  Forgery of instrument 
B)  Minority of maker 
C)  Material alteration 
D)  Theft of bearer paper

Question 9

Under the shelter rule, a person who is not a holder in due course can obtain the rights of a holder in due course.

Accepted Answer

A) True 
 B)False

Question 10

The notice requirement of the Federal Trade Commission rule for consumer credit contracts has the effect of:

Accepted Answer

A)  limiting the types of defenses to payment available to a consumer. 
B)  eliminating the real defenses to payment. 
C)  placing a holder in due course in the position of an assignee. 
D)  permitting a holder in due course to have a questionable instrument reviewed by the FTC. 
A)  limiting the types of defenses to payment available to a consumer. 
B)  eliminating the real defenses to payment. 
C)  placing a holder in due course in the position of an assignee. 
D)  permitting a holder in due course to have a questionable instrument reviewed by the FTC.

Question 11

The "value" requirement of a holder in due course is the same as "consideration" for a contract.

Accepted Answer

A) True 
 B)False

Question 12

If there is no indorsee designated on an indorsement bearing only the indorser's signature, it is a(n):

Accepted Answer

A)  qualified indorsement. 
B)  conditional indorsement. 
C)  blank indorsement. 
D)  allonge. 
A)  qualified indorsement. 
B)  conditional indorsement. 
C)  blank indorsement. 
D)  allonge.

Question 13

Steve issues a negotiable promissory note to Bob in exchange for Bob's promise to build an addition to Steve's home. The promissory note indicates this reason when Bob negotiates it to Willard for value. Can Willard be a holder in due course?

Accepted Answer

A)  Yes, unless he knows that Bob has not built the addition 
B)  Yes, unless he did not give adequate value 
C)  No, since he has taken the instrument with notice of a defense 
D)  No, since he has violated the "good faith" requirement 
A)  Yes, unless he knows that Bob has not built the addition 
B)  Yes, unless he did not give adequate value 
C)  No, since he has taken the instrument with notice of a defense 
D)  No, since he has violated the "good faith" requirement

Question 14

If Kathy indorses a check "without recourse":

Accepted Answer

A)  Kathy is not contractually liable if the check is not paid. 
B)  negotiability is destroyed. 
C)  the check cannot be transferred. 
D)  Kathy cannot transfer good title to the check. 
A)  Kathy is not contractually liable if the check is not paid. 
B)  negotiability is destroyed. 
C)  the check cannot be transferred. 
D)  Kathy cannot transfer good title to the check.

Question 15

Laura is in possession of a check which contains the following indorsement, "Sam Smith, without recourse, for collection only." The indorsement would be classified as:

Accepted Answer

A)  blank, qualified, and restrictive. 
B)  blank, unqualified, and unrestrictive. 
C)  special, unqualified, and restrictive. 
D)  special, qualified, and unrestrictive. 
A)  blank, qualified, and restrictive. 
B)  blank, unqualified, and unrestrictive. 
C)  special, unqualified, and restrictive. 
D)  special, qualified, and unrestrictive.

Question 16

57. A(n) indorsement is an indorsement made by a person that is not the holder of the instrument. The effect of
This indorsement is to make the signer liable on the instrument as an indorser.

Accepted Answer

A)  anomalous 
B)  blank 
C)  unqualified 
D)  special 
A)  anomalous 
B)  blank 
C)  unqualified 
D)  special

Question 17

All of the following are "real defenses" except a:

Accepted Answer

A)  note made by a minor. 
B)  check written while a gun is held to the drawer's head. 
C)  note given in exchange for worthless securities. 
D)  check fraudulently changed from $100 to $400. 
A)  note made by a minor. 
B)  check written while a gun is held to the drawer's head. 
C)  note given in exchange for worthless securities. 
D)  check fraudulently changed from $100 to $400.

Question 18

Which of the following is not a restrictive indorsement?

Accepted Answer

A)  "Without recourse" 
B)  "For deposit" 
C)  "Pay any bank" 
D)  "For collection" 
A)  "Without recourse" 
B)  "For deposit" 
C)  "Pay any bank" 
D)  "For collection"

Question 19

The type of indorsement used in first negotiating an instrument affects its subsequent negotiation.

Accepted Answer

A) True 
 B)False

Question 20

Personal defenses include all but which of the following?

Accepted Answer

A)  Breach of contract 
B)  Fraud in the execution 
C)  Misrepresentation 
D)  Failure of consideration 
A)  Breach of contract 
B)  Fraud in the execution 
C)  Misrepresentation 
D)  Failure of consideration

Exam 27: Transfer and Holder in Due Course

A blank indorsement converts order paper to bearer paper and leaves bearer paper as bearer paper.

An indorsement limiting payment to a particular person is effective.

A bank "gives value" when it allows a depositor to withdraw funds against a deposited item.

Every indorsement is either blank or special.

The transfer of a nonnegotiable promise or order operates as an assignment.

Cynthia Todd is the holder of a check with the indorsement "Adam Brock." To protect herself, Cynthia may:

Which of the following is a special unqualified indorsement?

Real defenses include all but which of the following?

Under the shelter rule, a person who is not a holder in due course can obtain the rights of a holder in due course.

The notice requirement of the Federal Trade Commission rule for consumer credit contracts has the effect of:

The "value" requirement of a holder in due course is the same as "consideration" for a contract.

If there is no indorsee designated on an indorsement bearing only the indorser's signature, it is a(n):

Steve issues a negotiable promissory note to Bob in exchange for Bob's promise to build an addition to Steve's home. The promissory note indicates this reason when Bob negotiates it to Willard for value. Can Willard be a holder in due course?

If Kathy indorses a check "without recourse":

Laura is in possession of a check which contains the following indorsement, "Sam Smith, without recourse, for collection only." The indorsement would be classified as:

57. A(n) indorsement is an indorsement made by a person that is not the holder of the instrument. The effect of This indorsement is to make the signer liable on the instrument as an indorser.

All of the following are "real defenses" except a:

Which of the following is not a restrictive indorsement?

The type of indorsement used in first negotiating an instrument affects its subsequent negotiation.

Personal defenses include all but which of the following?

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Relationship of Principal and Agent

Relationship With Third Parties

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Products Liability: Warranties and Strict Liability in Tort

Sales Remedies

Form and Content

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature, Formation, and Powers

Financial Structure

Management Structure

Fundamental Changes

Secured Transactions and Suretyship

Bankruptcy

Protection of Intellectual Property

Antitrust

Consumer Protection

Employment Law

Securities Regulation

Accountants Legal Liability

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Decedents Estates

the Legal Environment of Business

Contracts

Agency

Sales

Negotiable Instruments

Unincorporated Business Associations

Corporations

Debtor and Creditor Relations

Regulation of Business

Property

₅₇_._A(n) _indorsemen_t_i_s_a_n_indorsemen_t_mad_e_b_y_a_perso_n_tha_t_i_s_no_t_th_e_holde_r_o_f_th_e_instrument_._Th_e_effec_t_of This indorsement is to make the signer liable on the instrument as an indorser.