Question 1

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

Accepted Answer

A)  real defense 
B)  personal defense 
C)  claim in recoupment 
D)  claim to an instrument 
A)  real defense 
B)  personal defense 
C)  claim in recoupment 
D)  claim to an instrument C

Question 2

Sonia through fraudulent representations induced Gracie to execute a negotiable note payable to Sonia.Sonia is a holder in due course.

Accepted Answer

A) True 
 B)False  False

Question 3

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 B

Question 4

UCC section 2-302(a)(1)states that in order for an individual to become a holder in due course the instrument must not on its face do what?

Accepted Answer

A)  appear to be a forgery 
B)  written in a language other than English 
C)  have the signature of a foreigner 
D)  be on any other color paper than white 
A)  appear to be a forgery 
B)  written in a language other than English 
C)  have the signature of a foreigner 
D)  be on any other color paper than white

Question 5

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 institutionalized). 
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 institutionalized).

Question 6

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 7

Which of the following indorsements is a restrictive indorsement?

Accepted Answer

A)  "Pay to Jack Black,Mel Gibbs" 
B)  "Mel Gibbs" 
C)  "Pay to Jack Black in Trust for Mel Gibbs" 
D)  "Pay to the Order of Jack Black,Mel Gibbs" 
A)  "Pay to Jack Black,Mel Gibbs" 
B)  "Mel Gibbs" 
C)  "Pay to Jack Black in Trust for Mel Gibbs" 
D)  "Pay to the Order of Jack Black,Mel Gibbs"

Question 8

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 effectivel

Question 9

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.

Question 10

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 11

_____ 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 12

A holder in due course of a negotiable instrument always has the same rights as the individual that transferred the negotiable instrument to the holder.

Accepted Answer

A) True 
 B)False

Question 13

John received a check from his employer marked "pay to the order of John Jones." John used this check to pay for groceries from ABC Foods.He wrote on the back of the check: "pay to ABC Foods,for groceries." Was this check properly negotiated?

Accepted Answer

A)  No,because the statement that the check was for payment to ABC Foods defeats this negotiation. 
B)  No,because John did not indorse the check. 
C)  Yes,because John transferred possession of the check and ABC Foods acted in good faith. 
D)  Yes,because a holder's signature is not always needed in order to negotiate a check. 
A)  No,because the statement that the check was for payment to ABC Foods defeats this negotiation. 
B)  No,because John did not indorse the check. 
C)  Yes,because John transferred possession of the check and ABC Foods acted in good faith. 
D)  Yes,because a holder's signature is not always needed in order to negotiate a check.

Question 14

Under Revised Article 3,a person is a(n)_____ if she is in possession of an instrument that is payable to bearer or made payable to an identified person and she is that identified person.

Accepted Answer

A)  payor 
B)  issuer 
C)  bailor 
D)  holder 
A)  payor 
B)  issuer 
C)  bailor 
D)  holder

Question 15

An instrument that is indorsed with a _____ indorsement remains "order paper."

Accepted Answer

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

Question 16

In some circumstances,Article 3 allows a person to become a holder by negotiation,though the transfer of possession is involuntary.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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

Question 19

What is the shelter rule in Article 3?

Accepted Answer

The transferee of an instrument-whether

Question 20

What are the four categories of claims listed in Revised Article 3?

Accepted Answer

Revised Article 3 establishes four categ

Exam 32: Negotiation and Holder in Due Course

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

Sonia through fraudulent representations induced Gracie to execute a negotiable note payable to Sonia.Sonia is a holder in due course.

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

UCC section 2-302(a)(1)states that in order for an individual to become a holder in due course the instrument must not on its face do what?

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

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:

Which of the following indorsements is a restrictive indorsement?

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?

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

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.

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

A holder in due course of a negotiable instrument always has the same rights as the individual that transferred the negotiable instrument to the holder.

John received a check from his employer marked "pay to the order of John Jones." John used this check to pay for groceries from ABC Foods.He wrote on the back of the check: "pay to ABC Foods,for groceries." Was this check properly negotiated?

Under Revised Article 3,a person is a(n)_____ if she is in possession of an instrument that is payable to bearer or made payable to an identified person and she is that identified person.

An instrument that is indorsed with a _____ indorsement remains "order paper."

In some circumstances,Article 3 allows a person to become a holder by negotiation,though the transfer of possession is involuntary.

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?

What is the shelter rule in Article 3?

What are the four categories of claims listed in Revised Article 3?

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

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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

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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

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Shareholders Rights and Liabilities

Securities Regulation

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

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The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinson-Patman Act, and Antitrust Exemptions and Immunities

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