Exam 25: Transfer and Holder in Due Course

David makes and delivers a promissory note for $500 to the order of Kerry, who indorses the note and delivers it to Stan in payment of an outstanding debt Kerry owes him.Stan has given value as far as the Code requirements for a holder in due course.

A qualified indorsement destroys negotiability.

If a person paying an instrument subject to the impostor rule fails to exercise ordinary care, the issuer may recover from the payor to the extent the payor's negligence contributed to the loss.

Laura is in possession of a check which contains the following indorsement, "Sam Smith, without recourse, for collection only." The indorsement would be classified as:

Jill issues a negotiable promissory note to Cherice, who indorses it and delivers it to Lee.If Lee knows that the note was given to Cherice in exchange for worthless securities, Lee cannot be a holder in due course.

Jerry takes a $400 check to Primary Bank, where he asks for $75 in cash and he deposits the remaining balance.Primary Bank has "given value" as far as the requirements of holder in due course status to the extent of $75.

Arnie deposits a check from his sister in First City Bank, but forgot to indorse it.First City cannot become a holder until Arnie completes the indorsement.

Identify the type of indorsement each of the following represents. a.Pay to Bill, for collection. b.Pay to the order of The American Bank for deposit only. c.Pay to Albert, without recourse. d.John Smith.

An indorsement may be simple or complex.

One who is in possession of a negotiable instrument that is drawn, issued, or indorsed to him or to his order or that is indorsed in blank is a(n):

A(n) ___________ is the voluntary transfer to a third party of the rights arising from a contract.

The shelter rule did not exist at common law.

Whether a transfer is by assignment or by negotiation, the transferee does not acquire the rights the transferor had.

Which of the following is required regarding indorsements?

The customary manner of disclaiming the indorser's contractual liability is to add which of the following sets of words before or after his signature?

The impostor rule is an exception to the general rule that negotiation of any order instrument requires a valid indorsement by the person to whose order the instrument is payable.

Vicki, a bookkeeper for Emilio Enterprises, steals some of the checks she is supposed to post to her employer's account.She forges her employer's indorsement.The indorsement is:

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.

Wanda indorsed a check from her cousin by signing her name on the back, but she dropped it on the sidewalk on the way to the bank.The check is now comparable to cash because it is a bearer instrument.

The transfer of a nonnegotiable promise or order operates as an assignment.