Question 1

Once an instrument is negotiable,it remains negotiable.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an instrument payable to a specific,named payee?

Accepted Answer

A)  A bearer instrument. 
B)  A delivery instrument. 
C)  An order instrument. 
D)  A transfer instrument. 
E)  An acknowledgement instrument. 
A)  A bearer instrument. 
B)  A delivery instrument. 
C)  An order instrument. 
D)  A transfer instrument. 
E)  An acknowledgement instrument.

Question 3

Helen worked for ABC Company as the company treasurer.She took 20 of ABC Company's checks,labeled as belonging to ABC Company.Over the course of one year,she signed and mailed the checks to American Express,her own credit card company,to pay her own credit card debt.Assuming the court follows the case in the text,Watson Coatings Inc.,v.American Express Travel Services Inc.,which of the following is the most likely result in a lawsuit by ABC Company against American Express to recover the amounts of the checks?

Accepted Answer

A)  ABC Company will prevail because American Express, as a payee, does not qualify as a holder in due course. 
B)  ABC Company will prevail because American Express should have realized that fraud was involved from the fact that the checks were ABC Company checks. 
C)  ABC Company will prevail because fraud was involved. 
D)  American Express will prevail and will not be required to return funds. 
E)  American Express will have to return ½ of the funds because the parties were equally at fault, American Express for taking the checks, and ABC Company for not more carefully supervising its employee. 
A)  ABC Company will prevail because American Express, as a payee, does not qualify as a holder in due course. 
B)  ABC Company will prevail because American Express should have realized that fraud was involved from the fact that the checks were ABC Company checks. 
C)  ABC Company will prevail because fraud was involved. 
D)  American Express will prevail and will not be required to return funds. 
E)  American Express will have to return ½ of the funds because the parties were equally at fault, American Express for taking the checks, and ABC Company for not more carefully supervising its employee.

Question 4

Which of the following is a party who is in possession of an instrument that is payable to the party or to the bearer of the instrument?

Accepted Answer

A)  A holder. 
B)  A bearer. 
C)  A payee. 
D)  An issuer. 
E)  A transferee. 
A)  A holder. 
B)  A bearer. 
C)  A payee. 
D)  An issuer. 
E)  A transferee.

Question 5

In the process of negotiation,what is meant by the term "delivery"?

Accepted Answer

A)  The physical handing of an instrument from someone entitled to it to the person intended to receive it. 
B)  The passing of a warranty that the instrument is collectible. 
C)  The passing of a warranty that an instrument qualifies as a negotiable instrument. 
D)  The passing of a warranty that the recipient is a holder. 
E)  The passing of a warranty that the recipient is a holder in due course. 
A)  The physical handing of an instrument from someone entitled to it to the person intended to receive it. 
B)  The passing of a warranty that the instrument is collectible. 
C)  The passing of a warranty that an instrument qualifies as a negotiable instrument. 
D)  The passing of a warranty that the recipient is a holder. 
E)  The passing of a warranty that the recipient is a holder in due course.

Question 6

What is the effect of Susan receiving notice the day after she cashed the check for Bob that the check had been stolen?

Accepted Answer

A)  The notice has no effect on her status as holder in due course because it was provided after she cashed the check. 
B)  The notice prevents her from being a holder in due course. 
C)  The notice prevents her from being a holder in due course only if Bob had been convicted of check cashing offenses in the past since she should have checked his criminal record. 
D)  The notice prevents her from being a holder in due course only if she subjectively knew that Bob had been charged criminally with check cashing violations in the past. 
E)  The notice prevents her from being a holder in due course because it was presented to a business; only individuals can avoid the effect of notice of theft by cashing a check prior to receiving notice. 
A)  The notice has no effect on her status as holder in due course because it was provided after she cashed the check. 
B)  The notice prevents her from being a holder in due course. 
C)  The notice prevents her from being a holder in due course only if Bob had been convicted of check cashing offenses in the past since she should have checked his criminal record. 
D)  The notice prevents her from being a holder in due course only if she subjectively knew that Bob had been charged criminally with check cashing violations in the past. 
E)  The notice prevents her from being a holder in due course because it was presented to a business; only individuals can avoid the effect of notice of theft by cashing a check prior to receiving notice.

Question 7

What type of endorsement did Susan make on the back of the check?

Accepted Answer

A)  A special endorsement. 
B)  A special qualified endorsement. 
C)  A blank endorsement. 
D)  A blank qualified endorsement. 
E)  An ineffective endorsement because the words "without recourse" have no effect. 
A)  A special endorsement. 
B)  A special qualified endorsement. 
C)  A blank endorsement. 
D)  A blank qualified endorsement. 
E)  An ineffective endorsement because the words "without recourse" have no effect.

Question 8

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Accepted Answer

A) True 
 B)False

Question 9

In Russia a transaction involving a promissory note is a legitimate documentary transaction.

Accepted Answer

A) True 
 B)False

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

Once an instrument is negotiable,it remains negotiable.

Which of the following is an instrument payable to a specific,named payee?

Which of the following is a party who is in possession of an instrument that is payable to the party or to the bearer of the instrument?

In the process of negotiation,what is meant by the term "delivery"?

What is the effect of Susan receiving notice the day after she cashed the check for Bob that the check had been stolen?

What type of endorsement did Susan make on the back of the check?

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

In Russia a transaction involving a promissory note is a legitimate documentary transaction.

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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