Question 1

Which of the following is a "real" defense that is good against a holder in due course of a note?

Accepted Answer

A) The maker of the note is 15 years old. 
B) The note was procured by the payee's threat to prosecute the maker for drug dealing. 
C) No consideration was given for the note. 
D) The maker was in a seriously delusional state when he completed the note (but had not been declared insane or institutionalize
D) . 
A) The maker of the note is 15 years old. 
B) The note was procured by the payee's threat to prosecute the maker for drug dealing. 
C) No consideration was given for the note. 
D) The maker was in a seriously delusional state when he completed the note (but had not been declared insane or institutionalize
D) . A

Question 2

A person cannot be a holder in due course of a negotiable instrument if,when she takes it,the instrument is irregular or some important or material term is blank.

Accepted Answer

A) True 
 B)False  True

Question 3

In which of the following situations has the holder of a negotiable instrument not given value for it?

Accepted Answer

A) Where the holder takes the instrument as security for an antecedent claim. 
B) Where the holder gives a negotiable instrument in return for the one received. 
C) Where the holder receives the instrument as a gift. 
D) Where the holder acquires a security interest in the instrument. 
A) Where the holder takes the instrument as security for an antecedent claim. 
B) Where the holder gives a negotiable instrument in return for the one received. 
C) Where the holder receives the instrument as a gift. 
D) Where the holder acquires a security interest in the instrument. C

Question 4

What are the general requirements to become a holder in due course?

Accepted Answer

In order to become a holder in due cours

Question 5

Ahmed Cohen received a check for $5,000 for a used car he sold.The check did not specify to whom the check was payable.On the back of this check Ahmed wrote,in his handwriting,"Ahmed Cohen." This has the legal effect of:

Accepted Answer

A) making this instrument nonnegotiable. 
B) making this instrument void. 
C) making this instrument order paper. 
D) making this instrument bearer paper. 
A) making this instrument nonnegotiable. 
B) making this instrument void. 
C) making this instrument order paper. 
D) making this instrument bearer paper.

Question 6

To be a holder,a person must have a complete chain of ________ indorsements.

Accepted Answer

A) special 
B) restrictive 
C) authorized 
D) qualified 
A) special 
B) restrictive 
C) authorized 
D) qualified

Question 7

Duress that causes the transfer of a negotiable instrument:

Accepted Answer

A) prevents its negotiation. 
B) is a good defense against a holder in due course of the instrument. 
C) is subject to rescission before the instrument is transferred to a holder in due course. 
D) is a good defense against the maker of a note. 
A) prevents its negotiation. 
B) is a good defense against a holder in due course of the instrument. 
C) is subject to rescission before the instrument is transferred to a holder in due course. 
D) is a good defense against the maker of a note.

Question 8

Which of the following is generally true about the Federal Trade Commission's (FTC)regulations of the holder in due course rule?

Accepted Answer

A) Some states have eliminated the holder in due course rule by repealing the previous version of Article 3 and refusing to adopt the new version. 
B) The FTC has seriously limited the rule's impact in consumer credit situations in which the consumer signs a note or an installment sales contract,or gets financing from a third party. 
C) These changes in the holder in due course rule reflect the economic power and political influence of business interests,especially banks. 
D) Overall,the FTC's changes in the holder in due course rule are insignificant,especially in consumer cases. 
A) Some states have eliminated the holder in due course rule by repealing the previous version of Article 3 and refusing to adopt the new version. 
B) The FTC has seriously limited the rule's impact in consumer credit situations in which the consumer signs a note or an installment sales contract,or gets financing from a third party. 
C) These changes in the holder in due course rule reflect the economic power and political influence of business interests,especially banks. 
D) Overall,the FTC's changes in the holder in due course rule are insignificant,especially in consumer cases.

Question 9

A(n)________ takes a negotiable instrument free of all personal defenses,claims to the instrument,and claims in recoupment either of the obligor or of a third party.

Accepted Answer

A) holder in due course 
B) holder 
C) indorsee 
D) transferee 
A) holder in due course 
B) holder 
C) indorsee 
D) transferee

Question 10

A ________ indorsement can be used with either a blank indorsement or a special indorsement.

Accepted Answer

A) rebuttal 
B) conditional 
C) qualified 
D) restrictive 
A) rebuttal 
B) conditional 
C) qualified 
D) restrictive

Question 11

In the case in the text RR Maloan Investment v,New HGE,what affect did post-dating the check have on the negotiability of the check at issue?

Accepted Answer

A) The negotiability of the check was not affected by post-dating. 
B) The check was no longer negotiable because it was post-dated over a month. 
C) The check was no longer negotiable because it was post-dated at the holder's discretion. 
D) The check was no longer negotiable because it was post-dated "until the watch is authenticated." 
A) The negotiability of the check was not affected by post-dating. 
B) The check was no longer negotiable because it was post-dated over a month. 
C) The check was no longer negotiable because it was post-dated at the holder's discretion. 
D) The check was no longer negotiable because it was post-dated "until the watch is authenticated."

Question 12

What is the term for when law renders an obligation to pay an instrument void.

Accepted Answer

A) Forgery 
B) Comity 
C) Illegality 
D) Duress 
A) Forgery 
B) Comity 
C) Illegality 
D) Duress

Question 13

Which of the following is bearer paper?

Accepted Answer

A) A check payable to the order of X and specially indorsed to Y. 
B) A check payable to the order of X. 
C) A check payable to the order of cash and specially indorsed by the person who received it. 
D) A check payable to the order of cash and delivered to Y. 
A) A check payable to the order of X and specially indorsed to Y. 
B) A check payable to the order of X. 
C) A check payable to the order of cash and specially indorsed by the person who received it. 
D) A check payable to the order of cash and delivered to Y.

Question 14

A holder in due course does not take free of the ________,which go to the validity of the instrument or of claims that develop after he becomes a holder.

Accepted Answer

A) personal defenses 
B) relative defenses 
C) procedural defenses 
D) real defenses 
A) personal defenses 
B) relative defenses 
C) procedural defenses 
D) real defenses

Question 15

Which of the following means that the person obtained a negotiable instrument honestly and in the observance of reasonable commercial standards of fair dealing?

Accepted Answer

A) Holder in due course 
B) Value 
C) Good faith 
D) Without notice 
A) Holder in due course 
B) Value 
C) Good faith 
D) Without notice

Question 16

Anyone other than a bank,who purchases a check indorsed "for deposit only," has converted it;unless the indorser received the amount paid for the check or the bank deposited the check in the indorser's account.

Accepted Answer

A) True 
 B)False

Question 17

When a holder makes a blank indorsement of a negotiable instrument that is bearer paper,what legal effect does this have?

Accepted Answer

A) There is no effect-bearer paper does not need to be indorsed. 
B) The bearer negotiates it by transfer alone and no further indorsement is necessary for negotiation. 
C) The instrument is no longer negotiable,as it has been altered. 
D) The instrument is converted into order paper. 
A) There is no effect-bearer paper does not need to be indorsed. 
B) The bearer negotiates it by transfer alone and no further indorsement is necessary for negotiation. 
C) The instrument is no longer negotiable,as it has been altered. 
D) The instrument is converted into order paper.

Question 18

Svetlana Mills gives a check "payable to the order of Svetlana Mills," to a shopkeeper for some groceries.Here,the check would be considered as negotiated only upon the fulfillment of which of the following conditions?

Accepted Answer

A) The check should be indorsed by the shopkeeper. 
B) The check should bear the name of the shopkeeper. 
C) Svetlana should indorse the check in the name of the shopkeeper. 
D) Svetlana should indorse the check in her own name. 
A) The check should be indorsed by the shopkeeper. 
B) The check should bear the name of the shopkeeper. 
C) Svetlana should indorse the check in the name of the shopkeeper. 
D) Svetlana should indorse the check in her own name.

Question 19

Which of the following is a personal defense against a holder in due course?

Accepted Answer

A) Fraud in the essence 
B) Forgery 
C) Breach of contract 
D) Minority or infancy 
A) Fraud in the essence 
B) Forgery 
C) Breach of contract 
D) Minority or infancy

Question 20

________ indorsements are those when an indorser merely signs his name and does not specify to whom the instrument is payable.

Accepted Answer

A) Qualified 
B) Blank 
C) Special 
D) Conditional 
A) Qualified 
B) Blank 
C) Special 
D) Conditional

Exam 32: Negotiation and Holder in Due Course

Which of the following is a "real" defense that is good against a holder in due course of a note?

A person cannot be a holder in due course of a negotiable instrument if,when she takes it,the instrument is irregular or some important or material term is blank.

In which of the following situations has the holder of a negotiable instrument not given value for it?

What are the general requirements to become a holder in due course?

Ahmed Cohen received a check for $5,000 for a used car he sold.The check did not specify to whom the check was payable.On the back of this check Ahmed wrote,in his handwriting,"Ahmed Cohen." This has the legal effect of:

To be a holder,a person must have a complete chain of ________ indorsements.

Duress that causes the transfer of a negotiable instrument:

Which of the following is generally true about the Federal Trade Commission's (FTC)regulations of the holder in due course rule?

A(n)________ takes a negotiable instrument free of all personal defenses,claims to the instrument,and claims in recoupment either of the obligor or of a third party.

A ________ indorsement can be used with either a blank indorsement or a special indorsement.

In the case in the text RR Maloan Investment v,New HGE,what affect did post-dating the check have on the negotiability of the check at issue?

What is the term for when law renders an obligation to pay an instrument void.

Which of the following is bearer paper?

A holder in due course does not take free of the ________,which go to the validity of the instrument or of claims that develop after he becomes a holder.

Which of the following means that the person obtained a negotiable instrument honestly and in the observance of reasonable commercial standards of fair dealing?

Anyone other than a bank,who purchases a check indorsed "for deposit only," has converted it;unless the indorser received the amount paid for the check or the bank deposited the check in the indorser's account.

When a holder makes a blank indorsement of a negotiable instrument that is bearer paper,what legal effect does this have?

Svetlana Mills gives a check "payable to the order of Svetlana Mills," to a shopkeeper for some groceries.Here,the check would be considered as negotiated only upon the fulfillment of which of the following conditions?

Which of the following is a personal defense against a holder in due course?

________ indorsements are those when an indorser merely signs his name and does not specify to whom the instrument is payable.

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

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