Question 1

The transfer of an instrument:

Accepted Answer

A) vests in the transferee any right of the transferor,to enforce the instrument. 
B) bars the transferee from attaining the rights of the transferor. 
C) vests in the payor any right of the transferor,to enforce the instrument. 
D) bars the transferor to pass on his rights to the transferee. 
A) vests in the transferee any right of the transferor,to enforce the instrument. 
B) bars the transferee from attaining the rights of the transferor. 
C) vests in the payor any right of the transferor,to enforce the instrument. 
D) bars the transferor to pass on his rights to the transferee.

Question 2

Pete Payee specially indorses a note payable to his order and also uses the words "without recourse." What is the effect of the words "without recourse" here?

Accepted Answer

By these words,Pete effectively disclaim

Question 3

If an individual holds a note that is labeled consumer paper then that individual cannot be a holder in due course.

Accepted Answer

A) True 
 B)False

Question 4

Tom contracts with Susan to build her a shed for $6,000,payable on July 1 when he expects to complete the shed.Tom has assigned his right to payment to National Bank in order to obtain building materials.On July 1,National Bank tries to collect the money from Susan,but she refuses because Tom has not completed the shed.What is the result?

Accepted Answer

A) Susan must pay Tom on July 1. 
B) Susan must pay National Bank on July 1. 
C) Tom must pay National Bank on July 1. 
D) Susan does not need to pay National Bank until the shed is complete. 
A) Susan must pay Tom on July 1. 
B) Susan must pay National Bank on July 1. 
C) Tom must pay National Bank on July 1. 
D) Susan does not need to pay National Bank until the shed is complete.

Question 5

The new revision of Article 3 no longer considers ________ as restrictive indorsements.

Accepted Answer

A) indorsements for deposit 
B) conditional indorsements 
C) indorsements directing the indorsee to act for someone else's benefit 
D) indorsements for collection 
A) indorsements for deposit 
B) conditional indorsements 
C) indorsements directing the indorsee to act for someone else's benefit 
D) indorsements for collection

Question 6

Negotiation,as defined by the UCC in section 3-201,is the transfer of a negotiable instrument by one person to another person.

Accepted Answer

A) True 
 B)False

Question 7

A person who takes an instrument containing a restrictive indorsement,"Pay to Jack Black in Trust for Mel Gibbs,":

Accepted Answer

A) may not pay the proceeds to the indorsee without the due approval of the indorser. 
B) may pay the proceeds to the indorsee paying due regard to whether the indorsee violates a fiduciary duty to the indorser. 
C) may pay the proceeds to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser. 
D) may pay the proceeds to the indorser only with the approval and concurrence of the indorsee. 
A) may not pay the proceeds to the indorsee without the due approval of the indorser. 
B) may pay the proceeds to the indorsee paying due regard to whether the indorsee violates a fiduciary duty to the indorser. 
C) may pay the proceeds to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser. 
D) may pay the proceeds to the indorser only with the approval and concurrence of the indorsee.

Question 8

An indorsement is a signature of the holder typically on the back of a check.

Accepted Answer

A) True 
 B)False

Question 9

________ are legal reasons for avoiding or reducing liability of an individual who is liable on a negotiable instrument.

Accepted Answer

A) Personal defenses 
B) Procedural defenses 
C) Real defenses 
D) Excuse defenses 
A) Personal defenses 
B) Procedural defenses 
C) Real defenses 
D) Excuse defenses

Question 10

If a check is drawn "Pay to the order of Maria" and Maria indorses it "pay to the order of Jay,Maria." This falls under:

Accepted Answer

A) blank indorsement. 
B) restrictive indorsement. 
C) special indorsement. 
D) simple indorsement. 
A) blank indorsement. 
B) restrictive indorsement. 
C) special indorsement. 
D) simple indorsement.

Question 11

The City mails Joe Marsh a refund check for overpayment of a parking ticket.Harold Finch steals the check from Marsh's mailbox,signs "Joe Marsh" on the back of the check,and cashes it at a grocery store.Is the grocery store a holder of the check?

Accepted Answer

A) Yes,because Finch indorsed the check. 
B) Yes,because it is a holder in due course. 
C) No,because Finch was not a holder and the check was not signed by Marsh. 
D) No,because the check contained no indorsements. 
A) Yes,because Finch indorsed the check. 
B) Yes,because it is a holder in due course. 
C) No,because Finch was not a holder and the check was not signed by Marsh. 
D) No,because the check contained no indorsements.

Question 12

A bank or person who ________ an instrument in the regular course of trade has given value for it.

Accepted Answer

A) indorses 
B) transfers 
C) discounts 
D) holds 
A) indorses 
B) transfers 
C) discounts 
D) holds

Question 13

If the holder's name on an instrument is misspelled or wrong,then the indorsement:

Accepted Answer

A) can be made only in his name. 
B) can be made only in the name that is on the instrument. 
C) can be made either in his name or in the name that is on the instrument. 
D) can never be made by putting his name as well as the name that is on the instrument. 
A) can be made only in his name. 
B) can be made only in the name that is on the instrument. 
C) can be made either in his name or in the name that is on the instrument. 
D) can never be made by putting his name as well as the name that is on the instrument.

Question 14

A qualified indorsement is one where the indorser accepts the liability to make the instrument good if the maker or drawer defaults on it.

Accepted Answer

A) True 
 B)False

Question 15

In the case in the text Town of Freeport v.Ring,why did the court conclude that Ring did not indorse the check?

Accepted Answer

A) He failed to sign use his last name when he signed the back of the check. 
B) He signed "The Town of Freeport" on the back of the check. 
C) His signature only appeared on a separate,unattached piece of paper. 
D) His signature on the back of the check was illegible. 
A) He failed to sign use his last name when he signed the back of the check. 
B) He signed "The Town of Freeport" on the back of the check. 
C) His signature only appeared on a separate,unattached piece of paper. 
D) His signature on the back of the check was illegible.

Question 16

If a person who takes a negotiable instrument does not meet the requirements to be a holder in due course,he is in the same position as:

Accepted Answer

A) an assignee of a contract. 
B) the transferor. 
C) a beneficiary of a contract. 
D) a bearer. 
A) an assignee of a contract. 
B) the transferor. 
C) a beneficiary of a contract. 
D) a bearer.

Question 17

A ________ indorsement is one that specifies the purpose of the indorsement or specifies the use to be made of the instrument.

Accepted Answer

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

Question 18

If an order instrument is transferred without indorsement,then the instrument:

Accepted Answer

A) is deemed to have been negotiated and the bank can qualify as a holder. 
B) has not been negotiated and the transferee cannot qualify as a holder. 
C) is deemed to have been negotiated and the transferee can qualify as a holder. 
D) has been transferred and the bank and the transferee can qualify as a holder. 
A) is deemed to have been negotiated and the bank can qualify as a holder. 
B) has not been negotiated and the transferee cannot qualify as a holder. 
C) is deemed to have been negotiated and the transferee can qualify as a holder. 
D) has been transferred and the bank and the transferee can qualify as a holder.

Question 19

A claim in recoupment is a claim of the person obligated on the instrument against the original payee of the instrument.

Accepted Answer

A) True 
 B)False

Question 20

What section of the UCC defines negotiation of a negotiable instrument and who is a holder?

Accepted Answer

A) 3-201 
B) 2-221 
C) 1-105 
D) 3-401 
A) 3-201 
B) 2-221 
C) 1-105 
D) 3-401

Exam 32: Negotiation and Holder in Due Course

The transfer of an instrument:

Pete Payee specially indorses a note payable to his order and also uses the words "without recourse." What is the effect of the words "without recourse" here?

If an individual holds a note that is labeled consumer paper then that individual cannot be a holder in due course.

The new revision of Article 3 no longer considers ________ as restrictive indorsements.

Negotiation,as defined by the UCC in section 3-201,is the transfer of a negotiable instrument by one person to another person.

A person who takes an instrument containing a restrictive indorsement,"Pay to Jack Black in Trust for Mel Gibbs,":

An indorsement is a signature of the holder typically on the back of a check.

________ are legal reasons for avoiding or reducing liability of an individual who is liable on a negotiable instrument.

If a check is drawn "Pay to the order of Maria" and Maria indorses it "pay to the order of Jay,Maria." This falls under:

The City mails Joe Marsh a refund check for overpayment of a parking ticket.Harold Finch steals the check from Marsh's mailbox,signs "Joe Marsh" on the back of the check,and cashes it at a grocery store.Is the grocery store a holder of the check?

A bank or person who ________ an instrument in the regular course of trade has given value for it.

If the holder's name on an instrument is misspelled or wrong,then the indorsement:

A qualified indorsement is one where the indorser accepts the liability to make the instrument good if the maker or drawer defaults on it.

In the case in the text Town of Freeport v.Ring,why did the court conclude that Ring did not indorse the check?

If a person who takes a negotiable instrument does not meet the requirements to be a holder in due course,he is in the same position as:

A ________ indorsement is one that specifies the purpose of the indorsement or specifies the use to be made of the instrument.

If an order instrument is transferred without indorsement,then the instrument:

A claim in recoupment is a claim of the person obligated on the instrument against the original payee of the instrument.

What section of the UCC defines negotiation of a negotiable instrument and who is a holder?

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