Exam 24: Transferability and Liability

DeAnn is the payee of a bearer instrument-a promissory note in the amount of $10,000.LeBurt offers to irrigate DeAnn's ranch next week in ex-change for the note.DeAnn agrees and delivers the note to LeBurt.LeBurt is

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Question 1

Correct Answer:

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Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie.The price of the shares is constantly fluctuating.Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase.Eppie agrees.Fund Investments buys the stock when the price is $4,000,but fills in the check for $5,000.The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services,which takes the check in good faith and without notice of Fund Investments' act.Hasty later learns that Fund Investments was not authorized to fill in the check for $1,000 over the price.Is Hasty an HDC? If so,for how much?

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Question 2

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Hasty is an HDC to the extent of $5,000,the amount of the preexisting debt that Fund Investments owed Hasty,and for which Hasty accepted the check as payment.To qualify as an HDC,a holder must give value for a negotiable instrument.Taking an instrument as payment for an preexisting claim is giving value.Hasty accepted the $5,000 check from Fund Investments as payment for the debt.This is value.Hasty accepted this check before receiving notice of Eppie's defense against payment of it,so Hasty is an HDC for this amount.Even if Hasty had known that the check was incomplete when it was given to Fund Investments,Hasty would have qualified as an HDC.Knowledge that an incomplete instrument has been completed is not notice of a defense against payment.Eppie is liable to Hasty for the amount of the check as completed.

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

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(True/False)

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Question 3

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Verified

False

Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Home State Bank.Gerri presents the check for payment to Home State,which accepts it.Primarily liable on the check is

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Question 4

A holder takes an instrument for value by promising to perform in the future.

(True/False)

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Question 5

A negotiable instrument is not defective only because it

(Multiple Choice)

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Question 6

One of the transfer warranties is that the instrument has not been materially altered.

(True/False)

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Question 7

A holder takes an instrument for value if he or she inherits an instrument.

(True/False)

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Question 8

Jack wants to buy a promissory note from Jill.The note is due on April 1.To become an HDC,Jack must buy the note

(Multiple Choice)

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Question 9

A person who receives an instrument as a gift automatically possesses the rights of a holder in due course.

(True/False)

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Question 10

An ordinary holder can recover nothing on an instrument that has been materially altered.

(True/False)

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Question 11

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim,defense,or defect.With respect to this check,Kilroy is

(Multiple Choice)

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Question 12

At 1 a.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben buys a $500 promissory note for $50 from Curt. When presented with Ben's demand for payment, Diann, the maker of the note, could successfully claim that Ben

(Multiple Choice)

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Question 13

Beth,an accountant for Credits & Debits,acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days.Beth acquires the status of an HDC when she

(Multiple Choice)

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Question 14

Elinor performs ten hours of house cleaning for Floyd in exchange for a promissory note for $400.At the time that Elinor accepts the note,she is aware that bankruptcy proceedings are being filed against Floyd.Elinor can

(Multiple Choice)

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Question 15

Cici signs a check "pay to the order of Doug" drawn on Cici's account in Eastside Bank.Cici shows the check to Frederica,who agrees that the signature is Cici's and that Doug is owed the amount that the check represents.Doug signs the back of the check.Liability on this check extends to

(Multiple Choice)

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Question 16

The key to liability on a negotiable instrument is a signature.

(True/False)

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Question 17

Dishonor occurs if payment of an instrument is refused within the prescribed time.

(True/False)

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Question 18

Under the fictitious payee rule,the payee's indorsement is not treated as a forgery,and an innocent holder can hold the maker or drawer liable on the instrument.

(True/False)

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Question 19

Plumbing & Pipes Supply Company issues a promissory note as a demand instrument with a due date of October 5.Quantum Loan Company accepts the note.Quantum Loan has notice that the note is overdue if the firm takes the note

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Question 20

Showing 1 - 20 of 72

Exam 24: Transferability and Liability

DeAnn is the payee of a bearer instrument-a promissory note in the amount of $10,000.LeBurt offers to irrigate DeAnn's ranch next week in ex-change for the note.DeAnn agrees and delivers the note to LeBurt.LeBurt is

Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Home State Bank.Gerri presents the check for payment to Home State,which accepts it.Primarily liable on the check is​

A holder takes an instrument for value by promising to perform in the future.

A negotiable instrument is not defective only because it​

One of the transfer warranties is that the instrument has not been materially altered.

A holder takes an instrument for value if he or she inherits an instrument.

Jack wants to buy a promissory note from Jill.The note is due on April 1.To become an HDC,Jack must buy the note​

A person who receives an instrument as a gift automatically possesses the rights of a holder in due course.

An ordinary holder can recover nothing on an instrument that has been materially altered.

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim,defense,or defect.With respect to this check,Kilroy is​

At 1 a.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben buys a $500 promissory note for $50 from Curt. When presented with Ben's demand for payment, Diann, the maker of the note, could successfully claim that Ben​

Beth,an accountant for Credits & Debits,acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days.Beth acquires the status of an HDC when she​

Elinor performs ten hours of house cleaning for Floyd in exchange for a promissory note for $400.At the time that Elinor accepts the note,she is aware that bankruptcy proceedings are being filed against Floyd.Elinor can

Cici signs a check "pay to the order of Doug" drawn on Cici's account in Eastside Bank.Cici shows the check to Frederica,who agrees that the signature is Cici's and that Doug is owed the amount that the check represents.Doug signs the back of the check.Liability on this check extends to​

The key to liability on a negotiable instrument is a signature.

Dishonor occurs if payment of an instrument is refused within the prescribed time.

Under the fictitious payee rule,the payee's indorsement is not treated as a forgery,and an innocent holder can hold the maker or drawer liable on the instrument.

Plumbing & Pipes Supply Company issues a promissory note as a demand instrument with a due date of October 5.Quantum Loan Company accepts the note.Quantum Loan has notice that the note is overdue if the firm takes the note

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Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Home State Bank.Gerri presents the check for payment to Home State,which accepts it.Primarily liable on the check is

A negotiable instrument is not defective only because it

Jack wants to buy a promissory note from Jill.The note is due on April 1.To become an HDC,Jack must buy the note

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim,defense,or defect.With respect to this check,Kilroy is

At 1 a.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben buys a $500 promissory note for $50 from Curt. When presented with Ben's demand for payment, Diann, the maker of the note, could successfully claim that Ben

Beth,an accountant for Credits & Debits,acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days.Beth acquires the status of an HDC when she

Cici signs a check "pay to the order of Doug" drawn on Cici's account in Eastside Bank.Cici shows the check to Frederica,who agrees that the signature is Cici's and that Doug is owed the amount that the check represents.Doug signs the back of the check.Liability on this check extends to