Exam 27: Transfer and Holder in Due Course

Abby needs some quick cash, so she hits upon a scheme.She tells Frank that she is collecting for foreign refugees, so Frank makes out a check for $100 payable to the order of Abby.Abby indorses it and delivers it to Joanne for $90 cash.Joanne gives it to Margaret as a present.Frank discovers Abby's deception and refuses to pay Margaret.Will he win?

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?

A check is made payable "to the order of Sam Johnson." If this check is indorsed by Sam Johnson and given to Alex, Alex becomes the holder of the instrument.

Miller does the payroll for XYZ Company.In between Adams and Bates, he inserts the name Appleton and makes out a weekly paycheck in that name.He keeps the check for himself, signing "Appleton" and cashing it at a local bank.Auditors discovered the fake payee many months later.May XYZ require the bank to recredit?

Maria gives Joe $250 cash in return for Joe's indorsed check for $300.If Maria subsequently finds out that the check she took was given to Joe in return for a stolen car, Maria is no longer a holder in due course.

Which one of the following is not a personal defense?

Fraud in the execution of an instrument is a real defense which can be used against a holder in due course.

Which of the following is not a real defense?

Revised Article 3 provides that the impostor rule does not include an impostor who impersonates an agent of a principal and who induces someone to create a negotiable instrument payable to the principal.

A negotiation is void if the transaction in which it occurs is void.

Blane indorsed his paycheck in blank and cashed it at a store where he was a well-known customer.The check was then stolen from the store.The store immediately notified Blane's employer, who gave the drawee bank a stop payment order.The thief indorsed the check in a false name and transferred the check to a gas station/convenience store, which took the check in good faith and for value.The check was dishonored when presented to the drawee bank.Which of the following statements is true?

Order paper is negotiated by:

The requirements for negotiation are the same for both order paper and bearer paper.

Scott buys a television from Joe's TV Store, giving Joe a check for $550.Joe uses a special indorsement and negotiates the check to Tom.Tom carefully changes the amount to read $1550 and loses the check on the way to the bank.Harry picks it up and tries to cash it.What will he get?

An indorsement limiting payment to a particular person is effective.

A mere holder or an assignee takes a negotiable instrument subject to all claims and defenses to it.

Every indorsement is either blank or special.

A qualified indorsement destroys negotiability.

Joanne had a paycheck from Pizza Plaza for $54 made out to her.She indorsed it with her name and gave it to Larry, who in return agreed to paint her living room next Saturday.In this case:

The Code provides that for checks, a reasonable time for demand for payment is sixty days, after which a purchaser should be on notice the paper is overdue for the purpose of becoming a holder in due course.