Exam 28: Liability of Parties

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.

Failure to give notice of dishonor will discharge the drawer from having to pay on the instrument.

Charles is the holder of a promissory note, the maker of which is Charles' niece, Margaret.As a birthday gift to Margaret, Charles marked "Canceled" across the face of the note.Margaret remains liable on the note because she did not give Charles anything of value for the cancellation.

Notice of dishonor of an instrument:

In the banking system, the time for dishonor of a check can vary greatly depending on the number of banks involved in the collection process.

Notice of dishonor is waived if presentment has been waived.

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?

An indorser is discharged if a check is not presented for payment or given to a depositary bank for collection within days of the indorsement.

All of the following except which one are warranted by the transferor of a negotiable instrument?

Who is primarily liable on a note?

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

Franz signs a $1,000 note payable to ABC Bank.If, to help Franz get the loan approved, Amy also signs the note as an accommodation maker:

Warranty liability applies to persons who:

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

In all instances other than a drawee of an unaccepted draft or uncertified check, the only presentment warranty that is given is that the warrantor is a person entitled to enforce the instrument or is authorized to obtain payment on behalf of the person entitled to enforce.

Presentment for payment is one step necessary to charge an indorser with the obligation to pay.

Zoron Company purchased a truck from Ace Motors.The sales personnel at Ace know that Anton Green is an executive at Zoron.To pay for the truck, Anton delivered a $35,000 note to Ace and signed it "Anton Green, Agent." In this case:

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:

When a severe weather warning has been declared, a delay in notice is excused to the holder who was prevented from giving the notice until after the severe weather passed.

Bob took a check written by Jack to Jack's bank to be certified.The bank stamped "Certified" on it and gave it back to Bob.What consequence?