Question 1

A(n) _____ refers to a person in a relationship of trust and confidence, such as a trustee.

Accepted Answer

A)  presidiary 
B)  judiciary 
C)  fiduciary 
D)  intermediary 
A)  presidiary 
B)  judiciary 
C)  fiduciary 
D)  intermediary C

Question 2

A check is considered dishonored if it is returned to the holder stamped "insufficient funds."

Accepted Answer

A) True 
 B)False  True

Question 3

Explain presentment in detail.

Accepted Answer

Presentment is the demand for acceptance or payment made on the maker, acceptor, drawee, or other payor of commercial paper. In order for indorsers to remain secondarily liable, the instrument must be properly presented. This means that the instrument should be presented to the correct person, in a proper and timely manner. Presentment of instruments that state a specified date for payment should be made on that date. Other instruments must be presented for payment within a reasonable time after a party becomes liable on the instrument. The nature of the instrument, existing commercial usage, and the partial facts of the case determine what length of time is reasonable.

Question 4

A holder for value and in good faith with no knowledge of dishonor, defenses, or claims, or that paper is overdue is known as a _____.

Accepted Answer

A)  holder in presentment 
B)  holder in due course 
C)  holder in good faith 
D)  holder in liability 
A)  holder in presentment 
B)  holder in due course 
C)  holder in good faith 
D)  holder in liability

Question 5

Which of the following is an example of a dishonor?

Accepted Answer

A)  Dan forgets to make presentment of a check but demands money from Ben. 
B)  Dan issues a check to Ben, who takes it to the bank after six months and the bank declines. 
C)  Dan issues a check to Ben but it is returned by the bank due to insufficient funds. 
D)  Dan demands payment of a note from Ben before the due date and Ben declines. 
A)  Dan forgets to make presentment of a check but demands money from Ben. 
B)  Dan issues a check to Ben, who takes it to the bank after six months and the bank declines. 
C)  Dan issues a check to Ben but it is returned by the bank due to insufficient funds. 
D)  Dan demands payment of a note from Ben before the due date and Ben declines.

Question 6

A maker of a note is primarily liable and may be called on for payment.

Accepted Answer

A) True 
 B)False

Question 7

A check that is deposited into a bank account can only be from that particular bank.

Accepted Answer

A) True 
 B)False

Question 8

Generally, the rights of the holder of consumer paper are subject to all claims, defenses, and setoffs of the original purchaser arising from the consumer transaction.

Accepted Answer

A) True 
 B)False

Question 9

A(n) _____ is a claim a party being sued makes against the party suing.

Accepted Answer

A)  counter 
B)  setoff 
C)  fiduciary 
D)  imposition 
A)  counter 
B)  setoff 
C)  fiduciary 
D)  imposition

Question 10

_____ is the demand for acceptance or payment made on the maker, acceptor, drawee, or other payor of commercial paper.

Accepted Answer

A)  Indorsement 
B)  Abatement 
C)  Endorsement 
D)  Presentment 
A)  Indorsement 
B)  Abatement 
C)  Endorsement 
D)  Presentment

Question 11

Indorsers and drawers are the parties whose liability on negotiable instruments is ordinarily primary.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following best describes protest?

Accepted Answer

A)  It is a notice of dishonor that is lodged in a court of law by a third-party. 
B)  It is a notice of dishonor that is issued by the drawer. 
C)  It is a notice of dishonor that is issued by the maker. 
D)  It is a notice of dishonor that is certified by a public official authorized to do so. 
A)  It is a notice of dishonor that is lodged in a court of law by a third-party. 
B)  It is a notice of dishonor that is issued by the drawer. 
C)  It is a notice of dishonor that is issued by the maker. 
D)  It is a notice of dishonor that is certified by a public official authorized to do so.

Question 13

An agent who signs an instrument indicating a representative capacity will not have personal liability on the instrument.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true of primary liability?

Accepted Answer

A)  A maker of notes does not carry a primary liability. 
B)  A drawee is liable only by writing "accepted" and signing the draft. 
C)  A person with primary liability is liable to pay before the instrument is due. 
D)  An acceptor of drafts does not carry a primary liability. 
A)  A maker of notes does not carry a primary liability. 
B)  A drawee is liable only by writing "accepted" and signing the draft. 
C)  A person with primary liability is liable to pay before the instrument is due. 
D)  An acceptor of drafts does not carry a primary liability.

Question 15

The UCC specifies that for drawers on uncertified checks, a presentment within thirty days after the date of the check is presumed to be reasonable.

Accepted Answer

A) True 
 B)False

Question 16

Parties whose signatures do not appear on negotiable instruments are liable for their payment.

Accepted Answer

A) True 
 B)False

Question 17

Return of a check lacking a proper indorsement constitutes dishonor.

Accepted Answer

A) True 
 B)False

Question 18

In order to attain the specially favored status of being a holder in due course, the holder need not give value for the paper.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following best describes the shelter principle?

Accepted Answer

A)  It is a rule giving the holder rights of holder in due course. 
B)  It is a claim a party being sued makes against the party suing. 
C)  It is a rule that protects a holder from being sued. 
D)  It is a rule which protects the holder from judicial punishment. 
A)  It is a rule giving the holder rights of holder in due course. 
B)  It is a claim a party being sued makes against the party suing. 
C)  It is a rule that protects a holder from being sued. 
D)  It is a rule which protects the holder from judicial punishment.

Question 20

Normally, an unauthorized signature binds the person whose name is used.

Accepted Answer

A) True 
 B)False

Exam 24: Liabilities of Parties and Holders in Due Course

A(n) _____ refers to a person in a relationship of trust and confidence, such as a trustee.

A check is considered dishonored if it is returned to the holder stamped "insufficient funds."

Explain presentment in detail.

A holder for value and in good faith with no knowledge of dishonor, defenses, or claims, or that paper is overdue is known as a _____.

Which of the following is an example of a dishonor?

A maker of a note is primarily liable and may be called on for payment.

A check that is deposited into a bank account can only be from that particular bank.

Generally, the rights of the holder of consumer paper are subject to all claims, defenses, and setoffs of the original purchaser arising from the consumer transaction.

A(n) _____ is a claim a party being sued makes against the party suing.

_____ is the demand for acceptance or payment made on the maker, acceptor, drawee, or other payor of commercial paper.

Indorsers and drawers are the parties whose liability on negotiable instruments is ordinarily primary.

Which of the following best describes protest?

An agent who signs an instrument indicating a representative capacity will not have personal liability on the instrument.

Which of the following is true of primary liability?

The UCC specifies that for drawers on uncertified checks, a presentment within thirty days after the date of the check is presumed to be reasonable.

Parties whose signatures do not appear on negotiable instruments are liable for their payment.

Return of a check lacking a proper indorsement constitutes dishonor.

In order to attain the specially favored status of being a holder in due course, the holder need not give value for the paper.

Which of the following best describes the shelter principle?

Normally, an unauthorized signature binds the person whose name is used.

Introduction to Law

Courts and Court Procedure

Business Torts and Crimes

Government Regulation of Business

Nature and Classes of Contracts

Offer and Acceptance

Capacity to Contract

Consideration

Defective Agreements

Illegal Agreements

Written Contracts

Third Parties and Contracts

Termination of Contracts

Nature of Personal Property

Special Bailments

Sales of Personal Property

Formalities of a Sale

Transfer of Title and Risk in Sales Con

Warranties, Product Liability, and Cons

Nature of Negotiable Instruments

Essentials of Negotiability

Promissory Notes and Drafts

Negotiation and Discharge

Defenses

Nature and Creation of an Agency

Operation and Termination of an Agency

Employer and Employee Relations

Employees Rights

Labor Legislation

Introduction to Business Organization

Creation and Operation of a Partnership

Dissolution of a Partnership

Nature of a Corporation

Ownership of a Corporation

Management and Dissolution of a Corpora

Principles of Insurance

Types of Insurance

Security Devices

Bankruptcy

Nature of Real Property

Transfer of Real Property

Real Estate Mortgages

Landlord and Tenant

Wills, Inheritances, and Trusts

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