Question 1

The shelter rule did not exist at common law.

Accepted Answer

A) True 
 B)False

Question 2

Identify the defenses that can be used against a holder in due course and those defenses that cannot be used against a holder in due course.

Accepted Answer

Real defenses are those that can be used

Question 3

Every indorsement is either blank or special.

Accepted Answer

A) True 
 B)False

Question 4

A restrictive indorsement:

Accepted Answer

A)  disclaims contract liability. 
B)  removes warranty liability. 
C)  attempts to restrict the rights of the indorsee in some fashion. 
D)  always destroys negotiability. 
A)  disclaims contract liability. 
B)  removes warranty liability. 
C)  attempts to restrict the rights of the indorsee in some fashion. 
D)  always destroys negotiability.

Question 5

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):

Accepted Answer

A)  bearer. 
B)  holder. 
C)  transferor. 
D)  assignee. 
A)  bearer. 
B)  holder. 
C)  transferor. 
D)  assignee.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

What is negotiation? How does one become a "holder" of an instrument?

Accepted Answer

Negotiation is an instrument's voluntary

Question 8

A forged or otherwise unauthorized signature necessary to negotiation breaks the chain of title to the instrument.

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

The Code provides an exception to the executory promise rule in:

Accepted Answer

A)  the giving of a negotiable instrument. 
B)  the making of an irrevocable obligation to a third party. 
C)  the lack of notice. 
D)  Both the giving of a negotiable instrument  and the making of an irrevocable obligation to a third party  are correct. 
A)  the giving of a negotiable instrument. 
B)  the making of an irrevocable obligation to a third party. 
C)  the lack of notice. 
D)  Both the giving of a negotiable instrument  and the making of an irrevocable obligation to a third party  are correct.

Question 11

If the issuer and the person paying an instrument subject to the impostor rule are both negligent, comparative negligence would apply.

Accepted Answer

A) True 
 B)False

Question 12

The courts will never presume a negotiation of order paper was intended; the parties must clearly indicate a negotiation or else the courts will presume an assignment was intended.

Accepted Answer

A) True 
 B)False

Question 13

Time paper that states it is due on July 1, which is a Sunday, is overdue on:

Accepted Answer

A)  July 1. 
B)  July 2. 
C)  July 3. 
D)  It depends on when the instrument is presented for payment. 
A)  July 1. 
B)  July 2. 
C)  July 3. 
D)  It depends on when the instrument is presented for payment.

Question 14

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:

Accepted Answer

A)  blank, qualified, and restrictive. 
B)  blank, unqualified, and unrestrictive. 
C)  special, unqualified, and restrictive. 
D)  special, qualified, and unrestrictive. 
A)  blank, qualified, and restrictive. 
B)  blank, unqualified, and unrestrictive. 
C)  special, unqualified, and restrictive. 
D)  special, qualified, and unrestrictive.

Question 15

An indorsement may be simple or complex.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is required regarding indorsements?

Accepted Answer

A)  An indorsement must be written on the back side of the instrument. 
B)  Indorsements must comply with Federal Reserve Board guidelines in order for the instrument to be negotiable. 
C)  Indorsements must be made on a separate sheet of paper stapled to the instrument. 
D)  None of these. 
A)  An indorsement must be written on the back side of the instrument. 
B)  Indorsements must comply with Federal Reserve Board guidelines in order for the instrument to be negotiable. 
C)  Indorsements must be made on a separate sheet of paper stapled to the instrument. 
D)  None of these.

Question 17

Silas deposits his paycheck in First American Bank without indorsing it. First American cannot become a holder until Silas completes the indorsement.

Accepted Answer

A) True 
 B)False

Question 18

The principal advantage of negotiable instruments is their legitimacy.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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?

Accepted Answer

A)  For collection only. 
B)  Without recourse. 
C)  Pay to the order of. 
D)  For deposit only. 
A)  For collection only. 
B)  Without recourse. 
C)  Pay to the order of. 
D)  For deposit only.

Exam 25: Transfer and Holder in Due Course

The shelter rule did not exist at common law.

Identify the defenses that can be used against a holder in due course and those defenses that cannot be used against a holder in due course.

Every indorsement is either blank or special.

A restrictive indorsement:

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):

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

What is negotiation? How does one become a "holder" of an instrument?

A forged or otherwise unauthorized signature necessary to negotiation breaks the chain of title to the instrument.

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.

The Code provides an exception to the executory promise rule in:

If the issuer and the person paying an instrument subject to the impostor rule are both negligent, comparative negligence would apply.

The courts will never presume a negotiation of order paper was intended; the parties must clearly indicate a negotiation or else the courts will presume an assignment was intended.

Time paper that states it is due on July 1, which is a Sunday, is overdue on:

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:

An indorsement may be simple or complex.

Which of the following is required regarding indorsements?

Silas deposits his paycheck in First American Bank without indorsing it. First American cannot become a holder until Silas completes the indorsement.

The principal advantage of negotiable instruments is their legitimacy.

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

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?

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

Liability of Parties

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

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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