Question 1

A conditional endorsement destroys negotiability.

Accepted Answer

A) True 
 B)False  False

Question 2

A(n)___________ is a person receiving an endorsement.

Accepted Answer

A)  Allonge 
B)  Transferor 
C)  Transferee 
D)  Endorser 
E)  Endorsee 
A)  Allonge 
B)  Transferor 
C)  Transferee 
D)  Endorser 
E)  Endorsee E

Question 3

A(n)______ endorsement is the endorser's signature along with a named endorsee.

Accepted Answer

A)  Blank 
B)  Allonge 
C)  Qualified 
D)  Special 
E)  Specific 
A)  Blank 
B)  Allonge 
C)  Qualified 
D)  Special 
E)  Specific D

Question 4

Which of the following is true regarding Mary's claim that the endorsement by Annie was illegal because the note misspelled Annie's name?

Accepted Answer

A)  Mary is correct. 
B)  Mary is correct, but only because Annie signed the note, "Green," instead of "Greene," as such was on the note. 
C)  Mary is correct, but only because two payees are listed. 
D)  Mary is incorrect. 
E)  Mary is incorrect unless she can prove that Susie intentionally and purposefully spelled the name wrong to prevent negotiation. 
A)  Mary is correct. 
B)  Mary is correct, but only because Annie signed the note, "Green," instead of "Greene," as such was on the note. 
C)  Mary is correct, but only because two payees are listed. 
D)  Mary is incorrect. 
E)  Mary is incorrect unless she can prove that Susie intentionally and purposefully spelled the name wrong to prevent negotiation.

Question 5

A payee may not be a holder in due course.

Accepted Answer

A) True 
 B)False

Question 6

According to the UCC,which of the following is true regarding when a person has notice of a fact?

Accepted Answer

A)  Under the UCC a person has notice of a fact only when the person has actual knowledge of the fact. 
B)  Under the UCC a person has notice of a fact under the following two circumstances: (1) when the person has actual knowledge of the fact, and (2) when the person receives notice or notification of the facts. 
C)  Under the UCC a person has notice of a fact under the following three circumstances: (1) when the person has actual knowledge of the fact, (2) when the person receives notice or notification of the facts, and (3) when the person has reason to know the fact exists. 
D)  Under the UCC a person has notice of a fact only when the person has signed a verification to the effect that notice was received. 
E)  Under the UCC a person has notice of a fact only when the person receives written notification either through regular mail or electronic means. 
A)  Under the UCC a person has notice of a fact only when the person has actual knowledge of the fact. 
B)  Under the UCC a person has notice of a fact under the following two circumstances: (1) when the person has actual knowledge of the fact, and (2) when the person receives notice or notification of the facts. 
C)  Under the UCC a person has notice of a fact under the following three circumstances: (1) when the person has actual knowledge of the fact, (2) when the person receives notice or notification of the facts, and (3) when the person has reason to know the fact exists. 
D)  Under the UCC a person has notice of a fact only when the person has signed a verification to the effect that notice was received. 
E)  Under the UCC a person has notice of a fact only when the person receives written notification either through regular mail or electronic means.

Question 7

Which of the following is true regarding how a holder may take an instrument for value,but not become a holder in due course?

Accepted Answer

A)  The UCC provides that the only method by which a holder may take an instrument for value but not become a holder in due course is when the holder purchases the instrument at judicial sale or under legal process. 
B)  The UCC provides that the only method by which a holder may take an instrument for value, but not become a holder in due course is when the holder acquires an instrument through taking over an estate. 
C)  The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following two circumstances: (1) when the holder purchases the instrument at judicial sale or under legal process, and (2) when the holder acquires an instrument through taking over an estate. 
D)  The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following three circumstances: (1) when the holder purchases the instrument at judicial sale or under legal process, (2) when the holder acquires an instrument through taking over an estate, and (3) when the holder purchases the instrument as part of a bulk transaction not in the regular course of business of the transferor. 
E)  The UCC does not recognize circumstances under which a holder may take an instrument for value but not become a holder in due course, although under common law, a person who acquired an instrument through taking over an estate was classified as a holder but not a holder in due course. 
A)  The UCC provides that the only method by which a holder may take an instrument for value but not become a holder in due course is when the holder purchases the instrument at judicial sale or under legal process. 
B)  The UCC provides that the only method by which a holder may take an instrument for value, but not become a holder in due course is when the holder acquires an instrument through taking over an estate. 
C)  The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following two circumstances: (1) when the holder purchases the instrument at judicial sale or under legal process, and (2) when the holder acquires an instrument through taking over an estate. 
D)  The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following three circumstances: (1) when the holder purchases the instrument at judicial sale or under legal process, (2) when the holder acquires an instrument through taking over an estate, and (3) when the holder purchases the instrument as part of a bulk transaction not in the regular course of business of the transferor. 
E)  The UCC does not recognize circumstances under which a holder may take an instrument for value but not become a holder in due course, although under common law, a person who acquired an instrument through taking over an estate was classified as a holder but not a holder in due course.

Question 8

Which of the following was the result in Michael J.Kane,Jr.v.Grace Kroll,the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son,but later stopped payment on the check because her son said he could not repay her?

Accepted Answer

A)  The plaintiff was not allowed to recover because the stop payment order prevented the plaintiff from being a holder in due course. 
B)  The plaintiff was not allowed to recover because, although he was a holder in due course, the stop payment order negated his entitlement to payment. 
C)  The plaintiff was not allowed to recover because the defendant established a lack of consideration to her. 
D)  The plaintiff was allowed to recover on a contract theory although he was not a holder in due course. 
E)  The plaintiff was allowed to recover because he was a holder in due course. 
A)  The plaintiff was not allowed to recover because the stop payment order prevented the plaintiff from being a holder in due course. 
B)  The plaintiff was not allowed to recover because, although he was a holder in due course, the stop payment order negated his entitlement to payment. 
C)  The plaintiff was not allowed to recover because the defendant established a lack of consideration to her. 
D)  The plaintiff was allowed to recover on a contract theory although he was not a holder in due course. 
E)  The plaintiff was allowed to recover because he was a holder in due course.

Question 9

Which of the following was the result in Mid-Atlantic Tennis Courts Inc.,v.Citizens Bank and Trust Company of Maryland,the case in the text in which an employee of the plaintiff fraudulently deposited into his own account at the defending bank checks for which the plaintiff was payee,and the plaintiff sued the defending bank for checks endorsed by it "for deposit only" or with no endorsement?

Accepted Answer

A)  The court ruled that because the defending bank was merely the depositary bank, it held no responsibility to the plaintiff. 
B)  The court ruled that because employee fraud was involved, the defending bank held no responsibility to the plaintiff. 
C)  The court ruled that because a fraud was involved, regardless of whether or not it was on the part of plaintiff's employee, the defending bank held no responsibility to the plaintiff. 
D)  The court ruled that the defending bank was liable to the plaintiff for checks bearing the endorsement "for deposit only," but not for the checks with no endorsement because as to those checks, the bank was entitled to assume that the depositor was entitled to deposit the checks. 
E)  The court ruled that plaintiff was entitled to recover from the bank for all the checks. 
A)  The court ruled that because the defending bank was merely the depositary bank, it held no responsibility to the plaintiff. 
B)  The court ruled that because employee fraud was involved, the defending bank held no responsibility to the plaintiff. 
C)  The court ruled that because a fraud was involved, regardless of whether or not it was on the part of plaintiff's employee, the defending bank held no responsibility to the plaintiff. 
D)  The court ruled that the defending bank was liable to the plaintiff for checks bearing the endorsement "for deposit only," but not for the checks with no endorsement because as to those checks, the bank was entitled to assume that the depositor was entitled to deposit the checks. 
E)  The court ruled that plaintiff was entitled to recover from the bank for all the checks.

Question 10

Would the school be able to require that Susan cover the amount of the check based on the law of negotiable instruments?

Accepted Answer

A)  Yes, because she signed on the back with a blank unqualified endorsement. 
B)  Yes, because she signed on the back with a special qualified endorsement. 
C)  Yes, because she signed on the back regardless of the type of endorsement. 
D)  No, because she signed on the back using the words, "without recourse." 
E)  No, because the check was not properly delivered to Shifty. 
A)  Yes, because she signed on the back with a blank unqualified endorsement. 
B)  Yes, because she signed on the back with a special qualified endorsement. 
C)  Yes, because she signed on the back regardless of the type of endorsement. 
D)  No, because she signed on the back using the words, "without recourse." 
E)  No, because the check was not properly delivered to Shifty.

Question 11

A restrictive endorsement may limit the transferability of the instrument.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true regarding the requirement that a party take an instrument for value in order to be considered a holder in due course?

Accepted Answer

A)  The party must provide consideration. 
B)  The party must have provided a bargained-for promise. 
C)  The party must take the instrument in exchange for a promise that has already been performed. 
D)  The party must have begun performance on a promise and have provided consideration. 
E)  The party must have provided consideration or received the note as a gift. 
A)  The party must provide consideration. 
B)  The party must have provided a bargained-for promise. 
C)  The party must take the instrument in exchange for a promise that has already been performed. 
D)  The party must have begun performance on a promise and have provided consideration. 
E)  The party must have provided consideration or received the note as a gift.

Question 13

Which of the following is the result if a payee who receives an instrument with missing information completes the missing information in a way that is inconsistent with the intent of issuer,and the instrument has been clearly materially altered?

Accepted Answer

A)  The person taking the instrument cannot become a holder in due course. 
B)  The alteration does not prevent a person taking the flawed instrument from becoming a holder in due course. 
C)  There is no effect so long as the payee can establish that he or she did not receive any more consideration than that to which the payee was entitled. 
D)  The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the holder in due course had knowledge that the payee had done the alteration. 
E)  The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the transferee participated in the material alteration. 
A)  The person taking the instrument cannot become a holder in due course. 
B)  The alteration does not prevent a person taking the flawed instrument from becoming a holder in due course. 
C)  There is no effect so long as the payee can establish that he or she did not receive any more consideration than that to which the payee was entitled. 
D)  The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the holder in due course had knowledge that the payee had done the alteration. 
E)  The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the transferee participated in the material alteration.

Question 14

Which of the following is true regarding the status of Sam?

Accepted Answer

A)  He is not a holder in due course because he did not provide value. 
B)  He is not a holder because he did not provide value. 
C)  He is not a holder nor is he a holder in due course because he did not provide value. 
D)  The fact that a gift was involved does not prevent Sam from being a holder in due course so long as other requirements are satisfied. 
E)  The fact that a gift was involved does not prevent Sam from being a holder in due course so long as other requirements are satisfied and Sam is not a minor. 
A)  He is not a holder in due course because he did not provide value. 
B)  He is not a holder because he did not provide value. 
C)  He is not a holder nor is he a holder in due course because he did not provide value. 
D)  The fact that a gift was involved does not prevent Sam from being a holder in due course so long as other requirements are satisfied. 
E)  The fact that a gift was involved does not prevent Sam from being a holder in due course so long as other requirements are satisfied and Sam is not a minor.

Question 15

What is the effect of the alteration of the check on Susan's status as a holder in due course?

Accepted Answer

A)  The alteration has no effect because a holder is not charged with examining an instrument presented for payment. 
B)  The alteration will likely prohibit her from being a holder in due course. 
C)  The alteration will affect her status as a holder in due course only if she had been put on notice of prior criminal behavior in the past on the part of Bob. 
D)  The alteration will affect her status as a holder in due course only if the issuer can establish that it was not negligent in allowing a thief to gain access resulting in the alteration. 
E)  On the basis that the law does not want to unduly burden holders, the alteration will affect her status as a holder in due course only because the instrument was written for an amount in excess of $500. 
A)  The alteration has no effect because a holder is not charged with examining an instrument presented for payment. 
B)  The alteration will likely prohibit her from being a holder in due course. 
C)  The alteration will affect her status as a holder in due course only if she had been put on notice of prior criminal behavior in the past on the part of Bob. 
D)  The alteration will affect her status as a holder in due course only if the issuer can establish that it was not negligent in allowing a thief to gain access resulting in the alteration. 
E)  On the basis that the law does not want to unduly burden holders, the alteration will affect her status as a holder in due course only because the instrument was written for an amount in excess of $500.

Question 16

An endorsement to prohibit further endorsement prohibits further transfer.

Accepted Answer

A) True 
 B)False

Question 17

Set forth the requirements a party must meet in order to be considered a holder in due course.

Accepted Answer

In order to be considered a holder in du

Question 18

What is the effect of the designation,"Bill Brown,without recourse?"

Accepted Answer

A)  It has no effect on any subsequent holder. 
B)  It has no effect on anyone, including, but not limited to, any subsequent holder. 
C)  It means that Bill Brown does not provide any guarantees and that if the instrument is later dishonored, he cannot be held liable. 
D)  It means that Bill Brown is providing that any subsequent holder cannot be held liable. 
E)  Bill Brown is providing that neither he nor the person who transferred the instrument to him cannot be held further liable to any subsequent holder. 
A)  It has no effect on any subsequent holder. 
B)  It has no effect on anyone, including, but not limited to, any subsequent holder. 
C)  It means that Bill Brown does not provide any guarantees and that if the instrument is later dishonored, he cannot be held liable. 
D)  It means that Bill Brown is providing that any subsequent holder cannot be held liable. 
E)  Bill Brown is providing that neither he nor the person who transferred the instrument to him cannot be held further liable to any subsequent holder.

Question 19

Which of the following is true regarding the concept of negotiable instruments in Japan?

Accepted Answer

A)  The law governing securities in Japan is technical with little ambiguity or arbitrary application. 
B)  The Japanese recognize the legal concept of yuka shoken, which means "valuable securities." 
C)  The Japanese have a single legislative act governing both commercial paper and investment securities. 
D)  The Japanese Commercial Code recognizes the term negotiable instruments. 
E)  Japanese law does not regulate investment securities. 
A)  The law governing securities in Japan is technical with little ambiguity or arbitrary application. 
B)  The Japanese recognize the legal concept of yuka shoken, which means "valuable securities." 
C)  The Japanese have a single legislative act governing both commercial paper and investment securities. 
D)  The Japanese Commercial Code recognizes the term negotiable instruments. 
E)  Japanese law does not regulate investment securities.

Question 20

Was the check properly delivered to Shifty?

Accepted Answer

A)  Yes, because it was bearer paper, delivery occurred whenever possession was taken. 
B)  Yes, because it was order paper, delivery occurred whenever possession was taken. 
C)  Yes, but only because it was thereafter presented to the bank and cashed. 
D)  Yes, because both Shifty and the bank are considered holders in due course. 
E)  No, because he was not entitled to receive it. 
A)  Yes, because it was bearer paper, delivery occurred whenever possession was taken. 
B)  Yes, because it was order paper, delivery occurred whenever possession was taken. 
C)  Yes, but only because it was thereafter presented to the bank and cashed. 
D)  Yes, because both Shifty and the bank are considered holders in due course. 
E)  No, because he was not entitled to receive it.

Exam 27: Negotiation, Holder in Due Course, and Defenses

A conditional endorsement destroys negotiability.

A(n)___________ is a person receiving an endorsement.

A(n)______ endorsement is the endorser's signature along with a named endorsee.

Which of the following is true regarding Mary's claim that the endorsement by Annie was illegal because the note misspelled Annie's name?

A payee may not be a holder in due course.

According to the UCC,which of the following is true regarding when a person has notice of a fact?

Which of the following is true regarding how a holder may take an instrument for value,but not become a holder in due course?

Which of the following was the result in Michael J.Kane,Jr.v.Grace Kroll,the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son,but later stopped payment on the check because her son said he could not repay her?

Would the school be able to require that Susan cover the amount of the check based on the law of negotiable instruments?

A restrictive endorsement may limit the transferability of the instrument.

Which of the following is true regarding the requirement that a party take an instrument for value in order to be considered a holder in due course?

Which of the following is the result if a payee who receives an instrument with missing information completes the missing information in a way that is inconsistent with the intent of issuer,and the instrument has been clearly materially altered?

Which of the following is true regarding the status of Sam?

What is the effect of the alteration of the check on Susan's status as a holder in due course?

An endorsement to prohibit further endorsement prohibits further transfer.

Set forth the requirements a party must meet in order to be considered a holder in due course.

What is the effect of the designation,"Bill Brown,without recourse?"

Which of the following is true regarding the concept of negotiable instruments in Japan?

Was the check properly delivered to Shifty?

An Introduction to Dynamic Business Law

Business Ethics

The Uslegal System

Alternative Dispute Resolution

Constitutional Principles

International and Comparative Law

Crime and the Business Community

Tort Law

Negligence and Strict Liability

Product Liability

Liability of Accountants and Other Professionals

Intellectual Property

Introduction to Contracts

Agreement

Consideration

Capacity and Illegality

Reality of Assent

Contracts in Writing

Third Party Rights to Contracts

Performance,Breach of Contract,discharge,and Remedies

Introduction to Sales and Lease Contracts

Title,Risk of Loss,and Insurable Interest

Performance and Obligations Under Sales and Lease Contracts

Remedies for Breach of Sales and Lease Contracts

Warranties

Negotiable Instruments: Negotiability and Transferability

Liability,defenses,and Discharge

Checks and Electronic Fund Transfers

Secured Transactions

Other Creditors Remedies and Suretyship

Bankruptcy and Reorganization

Agency Formation and Duties

Liability to Third Parties and Termination

Forms of Business Organizations

Partnerships: Nature, Formation, and Operation

Partnerships: Termination and Limited Partnerships

Corporations: Formation and Financing

Corporations: Directors, Officers, and Shareholders

Corporations: Mergers, Consolidations, and Termination

Corporations: Securities and Investor Protection

Employment and Labor Law

Employment Discrimination

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

The Nature of Property, Personal Property, and Bailments

Real Property

Landlord-Tenant Law

Insurance Law

Wills and Trusts

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