Question 1

An accommodation party's liability is determined by the capacity in which he signs.

Accepted Answer

A) True 
 B)False

Question 2

A waiver of presentment will not waive the requirement of notice of dishonor.

Accepted Answer

A) True 
 B)False

Question 3

JimBob, a guest in Jimbo's house, opens Jimbo's desk and writes a check to himself on Jimbo's checking account, forging Jimbo's signature. He indorses the check " JimBob Saunders" and presents it to Jimbo's bank for payment. If the bank pays, can it collect from Jimbo's account?

Accepted Answer

A)  Yes, because JimBob is the real payee. 
B)  Yes, because Jimbo's name is on the check. 
C)  No, because bank should have known the signature is forged. 
D)  No, because Jimbo  did not know of the check. 
A)  Yes, because JimBob is the real payee. 
B)  Yes, because Jimbo's name is on the check. 
C)  No, because bank should have known the signature is forged. 
D)  No, because Jimbo  did not know of the check.

Question 4

Warranties on presentment are the same regardless of who is the payor or acceptor.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  has the same liability as that of an accommodation indorser on a check. 
B)  has $500 of liability to the bank and Franz has $500 of liability. 
C)  has secondary liability on the note. 
D)  and Franz both have primary liability on the note. 
A)  has the same liability as that of an accommodation indorser on a check. 
B)  has $500 of liability to the bank and Franz has $500 of liability. 
C)  has secondary liability on the note. 
D)  and Franz both have primary liability on the note.

Question 6

Shart is the treasurer of Oaklaw, Inc. He has authority to sign on behalf of the company. One day, he signs a note as follows: "Maurtin Shart, as treasurer." The company's name does not appear on the note. Is the company liable on the note? Is Shart liable on the note? Explain.

Accepted Answer

When an authorized agent indicates that

Question 7

"Presentment" is necessary within 10 days of the date of issuance of a check.

Accepted Answer

A) True 
 B)False

Question 8

a. Discuss primary liability on a note; on a check. 
b. What is secondary liability? What must be done before a person with secondary liability can be sued? Who has secondary liability on a note? Who has secondary liability on a check? 
c. How does contractual liability on the instrument differ from warranty liability?

Accepted Answer

a. If a person is primarily liable on a

Question 9

Indorsers of all instruments incur primary liability on the instrument.

Accepted Answer

A) True 
 B)False

Question 10

The signature of the maker of a note may not be typewritten or signed by means of a signature stamp, as only a handwritten signature is adequate to authenticate the instrument.

Accepted Answer

A) True 
 B)False

Question 11

Notice of dishonor of an instrument must be given:

Accepted Answer

A)  by a bank before midnight of the third banking day following the banking day on which it receives notice of dishonor. 
B)  by a bank before midnight on the next banking day following the banking day on which it receives notice of dishonor. 
C)  by a nonbank, with respect to an instrument taken for collection, within three business days following the day on which it received notice. 
D)  in all situations within seven calendar days following the day on which dishonor occurred. 
A)  by a bank before midnight of the third banking day following the banking day on which it receives notice of dishonor. 
B)  by a bank before midnight on the next banking day following the banking day on which it receives notice of dishonor. 
C)  by a nonbank, with respect to an instrument taken for collection, within three business days following the day on which it received notice. 
D)  in all situations within seven calendar days following the day on which dishonor occurred.

Question 12

Who is primarily liable on a note?

Accepted Answer

A)  The maker. 
B)  The indorsers. 
C)  The drawee bank. 
D)  The holder. 
A)  The maker. 
B)  The indorsers. 
C)  The drawee bank. 
D)  The holder.

Question 13

Warranties of a person obtaining payment or acceptance of an unaccepted draft include:

Accepted Answer

A)  the warrantor is a person entitled to enforce the draft. 
B)  the warrantor has no knowledge that the drawer's signature is unauthorized. 
C)  the draft has not been altered. 
D)  All of these are correct. 
A)  the warrantor is a person entitled to enforce the draft. 
B)  the warrantor has no knowledge that the drawer's signature is unauthorized. 
C)  the draft has not been altered. 
D)  All of these are correct.

Question 14

Which of the following is a warranty of the transferor?

Accepted Answer

A)  Transferor has no knowledge of any insolvency proceedings with respect to the maker, acceptor, or drawer of an unaccepted instrument. 
B)  Transferor warrants that all signatures are authentic and authorized. 
C)  Transferor warrants that he is entitled to enforce the instrument. 
D)  All of these are warranties of the transferor. 
A)  Transferor has no knowledge of any insolvency proceedings with respect to the maker, acceptor, or drawer of an unaccepted instrument. 
B)  Transferor warrants that all signatures are authentic and authorized. 
C)  Transferor warrants that he is entitled to enforce the instrument. 
D)  All of these are warranties of the transferor.

Question 15

List and generally explain the warranties on presentment.

Accepted Answer

The warranties on presentment depend on

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Unauthorized signatures include both forgeries and signatures made by an agent without authority.

Accepted Answer

A) True 
 B)False

Question 18

By indorsing a check, "Without recourse," Pat effectively disclaims both contractual and warranty liability.

Accepted Answer

A) True 
 B)False

Question 19

National Trust Bank returns a check because it does not have a necessary indorsement. This constitutes a dishonor of the check.

Accepted Answer

A) True 
 B)False

Question 20

Presentment is excused where the acceptor is undergoing bankruptcy.

Accepted Answer

A) True 
 B)False

Exam 26: Liability of Parties

An accommodation party's liability is determined by the capacity in which he signs.

A waiver of presentment will not waive the requirement of notice of dishonor.

JimBob, a guest in Jimbo's house, opens Jimbo's desk and writes a check to himself on Jimbo's checking account, forging Jimbo's signature. He indorses the check " JimBob Saunders" and presents it to Jimbo's bank for payment. If the bank pays, can it collect from Jimbo's account?

Warranties on presentment are the same regardless of who is the payor or acceptor.

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

Shart is the treasurer of Oaklaw, Inc. He has authority to sign on behalf of the company. One day, he signs a note as follows: "Maurtin Shart, as treasurer." The company's name does not appear on the note. Is the company liable on the note? Is Shart liable on the note? Explain.

"Presentment" is necessary within 10 days of the date of issuance of a check.

Indorsers of all instruments incur primary liability on the instrument.

The signature of the maker of a note may not be typewritten or signed by means of a signature stamp, as only a handwritten signature is adequate to authenticate the instrument.

Notice of dishonor of an instrument must be given:

Who is primarily liable on a note?

Warranties of a person obtaining payment or acceptance of an unaccepted draft include:

Which of the following is a warranty of the transferor?

List and generally explain the warranties on presentment.

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

Unauthorized signatures include both forgeries and signatures made by an agent without authority.

By indorsing a check, "Without recourse," Pat effectively disclaims both contractual and warranty liability.

National Trust Bank returns a check because it does not have a necessary indorsement. This constitutes a dishonor of the check.

Presentment is excused where the acceptor is undergoing bankruptcy.

Introduction to Law

Business Ethics

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

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Bank Deposits Collections and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

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Accountants Legal Liability

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International Business Law

Introduction to Property Property Insurance Bailments and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

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