Exam 28: Liability of Parties

Jan Arthur writes a $200 check to Bruce Nole who indorses it "Bruce Nole." Bruce gives the check to Anne Tate who indorses it "Without Recourse.Anne Tate." Anne sends the check to Joe Black, MD to pay her medical bill.If the bank refuses to honor the check, Black:

Discharge of liability on an instrument is final; it cannot be revived.

If an agent is authorized to execute an instrument on behalf of a principal and signs "Cornwall, principal, by Lyons, agent," only the principal is liable on the instrument.

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

Return for lack of proper indorsement constitutes a dishonor of the check.

Robert's payroll check was made payable "to the order of Robert Lewis." Robert deposited, but never indorsed, the check in ABC bank.Robert has no warranty liability on the check because his signature is not on the instrument.

A drawee bank is primarily liable after it accepts the check.

If a person entitled to enforce an instrument refuses a tender of payment, the refusal wholly discharges to the extent of the amount of tender every party who has a right of recourse against the party making tender.

To certify a check, the bank must:

In which of the following situations has conversion NOT occurred?

Drawers of checks may disclaim contractual liability by using the words "without recourse."

If a drawee bank pays an instrument containing a forged indorsement, the bank is liable for conversion.

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

Discuss the effect of an unauthorized signature on an instrument.

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.

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?

A drawee bank "accepts" a check by certification.

A check is dishonored if:

If a holder presents a note for payment to the maker, which one of the following warranties is given?

Once a check is issued, the drawee bank becomes primarily liable.