Question 1

List the claims and defenses available to a holder in due course under the Revised Article 3 of the Uniform Commercial Code.

Accepted Answer

Under Revised Article 3 of the Uniform Commercial Code,there are four categories of claims and defenses available to a holder in due course.These include:
(1)real defenses-which go to the validity of the instrument;
(2)personal defenses-which generally arise out of the transaction that gave rise to the instrument;
(3)claims to an instrument-which generally concern property or possessory rights in an instrument or its proceeds;
(4)claims in recoupment-which arise out of the transaction that gave rise to the instrument.

Question 2

An indorsement that specifies the purpose of the indorsement or specifies the use to be made of the instrument is termed as a _____.

Accepted Answer

A)  special indorsement 
B)  restrictive indorsement 
C)  blank indorsement 
D)  qualified indorsement 
A)  special indorsement 
B)  restrictive indorsement 
C)  blank indorsement 
D)  qualified indorsement B

Question 3

An indorsement cannot incur the indorser's liability on the instrument.

Accepted Answer

A) True 
 B)False  False

Question 4

With instruments payable at a definite time,Revised Article 3 of the Uniform Commercial Code requires that if:

Accepted Answer

A)  the principal is not payable in installments and the due date has not been accelerated, the instrument is overdue on the day after the due date. 
B)  the principal is due in installments and a due date has not been accelerated, the instrument is overdue on the day after the due date. 
C)  a due date for the principal has been accelerated, the instrument is overdue upon default. 
D)  there is a default in payment of the interest but no default in the payment of principal, the instrument becomes overdue. 
A)  the principal is not payable in installments and the due date has not been accelerated, the instrument is overdue on the day after the due date. 
B)  the principal is due in installments and a due date has not been accelerated, the instrument is overdue on the day after the due date. 
C)  a due date for the principal has been accelerated, the instrument is overdue upon default. 
D)  there is a default in payment of the interest but no default in the payment of principal, the instrument becomes overdue.

Question 5

Which of the following can be negotiated by transfer of possession of an instrument after indorsement by the person specified?

Accepted Answer

A)  Order paper 
B)  Bearer paper 
C)  Blank endorsement 
D)  Teller's check 
A)  Order paper 
B)  Bearer paper 
C)  Blank endorsement 
D)  Teller's check

Question 6

Which of the following statements is true of a restrictive indorsement?

Accepted Answer

A)  A person who purchases a check indorsed "for collection" automatically converts it even if the indorser received the amount paid for it. 
B)  If an indorser merely signs his name and does not specify to whom the instrument is payable, he has indorsed the instrument in restriction. 
C)  A person who takes an instrument with a restrictive indorsement should not pay for the instrument consistently with the indorsement. 
D)  It includes indorsements for collection, which are commonly put on by banks involved in the collection process, and indorsements for deposit. 
A)  A person who purchases a check indorsed "for collection" automatically converts it even if the indorser received the amount paid for it. 
B)  If an indorser merely signs his name and does not specify to whom the instrument is payable, he has indorsed the instrument in restriction. 
C)  A person who takes an instrument with a restrictive indorsement should not pay for the instrument consistently with the indorsement. 
D)  It includes indorsements for collection, which are commonly put on by banks involved in the collection process, and indorsements for deposit.

Question 7

The claims and defenses to payment of an instrument that go to the validity of the instrument are called _____.

Accepted Answer

A)  real defenses 
B)  personal defenses 
C)  claims in recoupment 
D)  claims to an instrument 
A)  real defenses 
B)  personal defenses 
C)  claims in recoupment 
D)  claims to an instrument

Question 8

A person is a(n)_____ if she is in possession of an instrument that is payable to bearer or that is made payable to an identified person and she is that identified person.

Accepted Answer

A)  issuer 
B)  holder 
C)  payor bank drawee 
D)  drawer 
A)  issuer 
B)  holder 
C)  payor bank drawee 
D)  drawer

Question 9

Under the Revised Article 3 of the Uniform Commercial Code,a check deposited in a depositary bank without indorsement makes the:

Accepted Answer

A)  bank a holder of an item delivered to it only if the customer indorses it. 
B)  bank a holder of an item delivered to it for collection whether or not the customer indorses it. 
C)  customer the holder only if the bank indorses it at the time of delivery. 
D)  customer the holder only if the bank at the time of delivery qualified as a holder. 
A)  bank a holder of an item delivered to it only if the customer indorses it. 
B)  bank a holder of an item delivered to it for collection whether or not the customer indorses it. 
C)  customer the holder only if the bank indorses it at the time of delivery. 
D)  customer the holder only if the bank at the time of delivery qualified as a holder.

Question 10

A check drawn "Pay to the Order of Shoma Chatterjee" is indorsed "Shoma Chatterjee" by Shoma.Given this information,we can conclude that the type of indorsement is _____.

Accepted Answer

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

Question 11

Ming indorsed a check from his employer by signing Ming's name and the words "without recourse." This indorsement is an example of a _____.

Accepted Answer

A)  qualified indorsement 
B)  blank indorsement 
C)  special indorsement 
D)  restrictive indorsement 
A)  qualified indorsement 
B)  blank indorsement 
C)  special indorsement 
D)  restrictive indorsement

Question 12

In order to become a holder in due course,a person who takes a negotiable instrument must be a holder,and take the instrument:

Accepted Answer

A)  without notice that the instrument contains an authorized signature. 
B)  with notice that it is overdue or has been dishonored. 
C)  with notice of any claim of a property or possessory interest in it. 
D)  without notice that any party has any defense against it or claim in recoupment to it. 
A)  without notice that the instrument contains an authorized signature. 
B)  with notice that it is overdue or has been dishonored. 
C)  with notice of any claim of a property or possessory interest in it. 
D)  without notice that any party has any defense against it or claim in recoupment to it.

Question 13

Which of the following statements is true of an indorsement?

Accepted Answer

A)  It applies only to payments made to a depositary bank. 
B)  It does not affect future attempts to negotiate the instrument. 
C)  It generally does not make a person liable on the instrument even if he or she is engaged in any illegality affecting the instrument. 
D)  It makes a person liable on an instrument indorsed by him or her if the person primarily liable on it does not pay it. 
A)  It applies only to payments made to a depositary bank. 
B)  It does not affect future attempts to negotiate the instrument. 
C)  It generally does not make a person liable on the instrument even if he or she is engaged in any illegality affecting the instrument. 
D)  It makes a person liable on an instrument indorsed by him or her if the person primarily liable on it does not pay it.

Question 14

If a negotiable instrument is payable on demand,it is overdue:

Accepted Answer

A)  the day after demand for payment has been made in a proper manner and form. 
B)  30 days after its date if it is a check. 
C)  three days after demand for payment has been made in a proper manner and form. 
D)  60 days after its date if it is a check. 
A)  the day after demand for payment has been made in a proper manner and form. 
B)  30 days after its date if it is a check. 
C)  three days after demand for payment has been made in a proper manner and form. 
D)  60 days after its date if it is a check.

Question 15

The involuntary transfer of possession of a bearer instrument does not result in a negotiation.

Accepted Answer

A) True 
 B)False

Question 16

An instrument that is indorsed with a special indorsement is known as "bearer paper."

Accepted Answer

A) True 
 B)False

Question 17

If an instrument is a bearer paper,the person who takes the instrument cannot ask for an indorsement for her protection.

Accepted Answer

A) True 
 B)False

Question 18

How does one become a "holder in due course"?

Accepted Answer

In order to become a holder in due cours

Question 19

Real defenses can be used as reasons against payment of a negotiable instrument to any holder,including a holder in due course.

Accepted Answer

A) True 
 B)False

Question 20

Mantra Oil Inc.indorses a check "Pay Habib Coal Corp.only if it delivers 1,000 tons of coal by September 30,2014." Under Revised Article 3 of the Uniform Commercial Code,this is a _____.

Accepted Answer

A)  blank endorsement 
B)  qualified endorsement 
C)  conditional endorsement 
D)  restrictive endorsement 
A)  blank endorsement 
B)  qualified endorsement 
C)  conditional endorsement 
D)  restrictive endorsement

Exam 39: Negotiation and Holder in Due Course

List the claims and defenses available to a holder in due course under the Revised Article 3 of the Uniform Commercial Code.

An indorsement that specifies the purpose of the indorsement or specifies the use to be made of the instrument is termed as a _____.

An indorsement cannot incur the indorser's liability on the instrument.

With instruments payable at a definite time,Revised Article 3 of the Uniform Commercial Code requires that if:

Which of the following can be negotiated by transfer of possession of an instrument after indorsement by the person specified?

Which of the following statements is true of a restrictive indorsement?

The claims and defenses to payment of an instrument that go to the validity of the instrument are called _____.

A person is a(n)_____ if she is in possession of an instrument that is payable to bearer or that is made payable to an identified person and she is that identified person.

Under the Revised Article 3 of the Uniform Commercial Code,a check deposited in a depositary bank without indorsement makes the:

A check drawn "Pay to the Order of Shoma Chatterjee" is indorsed "Shoma Chatterjee" by Shoma.Given this information,we can conclude that the type of indorsement is _____.

Ming indorsed a check from his employer by signing Ming's name and the words "without recourse." This indorsement is an example of a _____.

In order to become a holder in due course,a person who takes a negotiable instrument must be a holder,and take the instrument:

Which of the following statements is true of an indorsement?

If a negotiable instrument is payable on demand,it is overdue:

The involuntary transfer of possession of a bearer instrument does not result in a negotiation.

An instrument that is indorsed with a special indorsement is known as "bearer paper."

If an instrument is a bearer paper,the person who takes the instrument cannot ask for an indorsement for her protection.

How does one become a "holder in due course"?

Real defenses can be used as reasons against payment of a negotiable instrument to any holder,including a holder in due course.

Mantra Oil Inc.indorses a check "Pay Habib Coal Corp.only if it delivers 1,000 tons of coal by September 30,2014." Under Revised Article 3 of the Uniform Commercial Code,this is a _____.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Propertypart Two Contracts

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remediespart Three Sales

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contractspart Four Agency and Employment

The Agency Relationship-Creation, duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws-Part Five Business Organizations

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountantspart Six Property

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance-Part Seven Commercial Paper

Negotiable Instruments

Liability of Parties

Checks and Electronic Fund Transfers-Part Eight Credit Transactions

Introduction to Security

Security Interests in Personal Property

Bankruptcy-Part Nine Government Regulation

The Antitrust Laws

Consumer Protection Laws

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