Exam 26: Liability of Parties

The use of the qualifying word(s) __________ is/are understood to place purchasers on notice that they may not rely on the credit of the person using this language.

An accommodation party will always be primarily liable on an instrument.

If a holder presents a note for payment to the maker, which of the following warranties is/are given?

A waiver of presentment will waive the requirement of notice of dishonor as well.

A signature may be made by an individual herself or by an authorized agent.

Molly makes a note payable to the order of Patrick; Patrick indorses it to Amy; Amy indorses it to Blake; and Blake indorses it to Homer. Homer presents the note to Molly within a reasonable time, but she refuses to pay. If Homer notifies only Patrick of the dishonor, Amy and Blake are discharged from liability.

A drawee bank is primarily liable after it accepts the check.

Any kind of notice of dishonor that informs the recipient of potential liability is sufficient.

Primary liability does not apply to issuers of cashier's checks.

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

A drawee bank's refusal to certify a check constitutes dishonor of the instrument.

An acceptance must be written on the draft.

Brad wrote a check to Clara for $1,000 on his account at First Bank. He then took it to his bank for certification. The bank wrote "certified" on the face of the check. Brad then gave the check to Clara. When Clara took the check to First Bank, they refused to pay, claiming that there was not enough money in Brad's account to cover the check. Which of the following is correct?

Presentment is excused where the acceptor is undergoing bankruptcy.

What is the difference between the liability of a qualified indorser and an unqualified indorser? Does the fact that a person has given a qualified indorsement mean that the person has no liability? Explain.

Who is primarily liable on a note?

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

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

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

Sarah has a checking account at First Bank. Orrin steals one of her blank checks, writes a check for $250 to himself, and then forges Sarah's signature. Orrin then indorses the instrument to Paul in payment of a debt. Paul, who does not know of the forgery, presents the instrument to First Bank for payment. At First Bank's request, Paul indorses the instrument, and the bank then pays him $250. Which of the following is correct?