Question 1

Paula wants to transfer a check to Quinn.The check is defective if it

Accepted Answer

A) has been previously dishonored. 
B) has no irregularities on its face. 
C) is not overdue. 
D) is so complete that no element of negotiability is lacking. 
A) has been previously dishonored. 
B) has no irregularities on its face. 
C) is not overdue. 
D) is so complete that no element of negotiability is lacking. A

Question 2

Wilson buys a promissory note from Oli.The note is due on December 5.December 5 is a Sunday.The note

Accepted Answer

A) is payable anytime the week of December 6. 
B) is payable December 6. 
C) is payable on December 5 only. 
D) is considered defective. 
A) is payable anytime the week of December 6. 
B) is payable December 6. 
C) is payable on December 5 only. 
D) is considered defective. B

Question 3

Kris transfers a note,on which Liu is the maker,to Mia,who takes it for value and in good faith.Mia knows that Kris breached the contract underlying the note,giving Liu a defense against payment.With respect to this note,Mia is

Accepted Answer

A) a knowledgeable holder in due course. 
B) an ordinary holder. 
C) an ordinary holder in due course. 
D) an ordinary note taker. 
A) a knowledgeable holder in due course. 
B) an ordinary holder. 
C) an ordinary holder in due course. 
D) an ordinary note taker. B

Question 4

When an instrument is dishonored,only written notice is sufficient to hold secondary parties liable.

Accepted Answer

A) True 
 B)False

Question 5

Beth,an accountant for Credits & Debits,acquires a negotiable instru?ment from Ellen by promis?ing to pay its face value in thirty days.Beth ac?quires the status of an HDC when she

Accepted Answer

A) acquires possession of the negotiable instrument. 
B) agrees with Ellen to buy the negotiable instrument. 
C) pays the face value due on the instrument. 
D) transfers the instrument to another party. 
A) acquires possession of the negotiable instrument. 
B) agrees with Ellen to buy the negotiable instrument. 
C) pays the face value due on the instrument. 
D) transfers the instrument to another party.

Question 6

Will is the payee of a promissory note for $500.James offers to mow Will's lawn five times in exchange for the note.Will agrees.After fifth time James mows Will's lawn,James is

Accepted Answer

A) an HDC. 
B) not an HDC,because he has not fully performed his promise. 
C) not an HDC,because he did not take the note in good faith. 
D) not an HDC,because he did not check if the note was overdue. 
A) an HDC. 
B) not an HDC,because he has not fully performed his promise. 
C) not an HDC,because he did not take the note in good faith. 
D) not an HDC,because he did not check if the note was overdue.

Question 7

Entrepreneur Auto Rentals owes Sole Saver Auto Dealership $2,000.Entrepreneur executes a note to Sole Saver as security for the debt.This security

Accepted Answer

A) does not constitute sufficient consideration for HDC status. 
B) does not satisfy the value requirement for HDC status. 
C) satisfies the consideration requirement for HDC status. 
D) satisfies the value requirement for HDC status. 
A) does not constitute sufficient consideration for HDC status. 
B) does not satisfy the value requirement for HDC status. 
C) satisfies the consideration requirement for HDC status. 
D) satisfies the value requirement for HDC status.

Question 8

Elinor performs ten hours of house cleaning for Zack in exchange for a promissory note for $400.At the time that Elinor accepts the note,she is aware that bankruptcy proceedings are being filed against Zack.Elinor

Accepted Answer

A) can obtain HDC status. 
B) cannot obtain HDC status,because she knows that there are bankruptcy proceedings against Zack. 
C) cannot obtain HDC status,because she did not fulfill the value requirement. 
D) cannot obtain HDC status,because she did not fulfill the good faith requirement. 
A) can obtain HDC status. 
B) cannot obtain HDC status,because she knows that there are bankruptcy proceedings against Zack. 
C) cannot obtain HDC status,because she did not fulfill the value requirement. 
D) cannot obtain HDC status,because she did not fulfill the good faith requirement.

Question 9

One of the transfer warranties is that the instrument has not been materially altered.

Accepted Answer

A) True 
 B)False

Question 10

A fictitious payee is a payee on a negotiable instrument whom the maker or drawer does not intend to have an interest in the instrument.

Accepted Answer

A) True 
 B)False

Question 11

A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

Accepted Answer

A) True 
 B)False

Question 12

A person who transfers an instrument for consideration makes certain warranties to the transferee.

Accepted Answer

A) True 
 B)False

Question 13

If an instrument is incomplete when the maker signs it,then the maker's obligation to pay is according to the terms as stated at that time.

Accepted Answer

A) True 
 B)False

Question 14

Commercial Credit Company has in its possession an instrument dated May 1,2012.The instrument is payable to the order of Alpha Company "on June 1,2013," for $5,000.In the upper left corner is an address for Beta Corporation-10 Corporate Park Avenue,Chicago,Illinois-and in the lower right corner is the signature of "Delta,Inc.,By Eve,President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank,President,May 5,2012." On the back is the signature of "Alpha Company By Gail,President." Who,if anyone,is primarily liable on this instrument on May 1? On May 5? Who,if anyone,is secondarily liable on this instrument?

Accepted Answer

No one is primarily liable on this instr

Question 15

Jeff's grandmother is the payee of a promissory note for $7,500.Jeff's grandmother gives Jeff the note for his sixteenth birthday.Jeff is

Accepted Answer

A) an HDC. 
B) not an HDC,because he received the note as a gift. 
C) not an HDC,because he is a minor. 
D) not an HDC,because the note was for less than $10,000. 
A) an HDC. 
B) not an HDC,because he received the note as a gift. 
C) not an HDC,because he is a minor. 
D) not an HDC,because the note was for less than $10,000.

Question 16

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim,defense,or defect.With respect to this check,Kilroy is

Accepted Answer

A) an extraordinary holder in due course. 
B) an ordinary check passer. 
C) an ordinary holder. 
D) an ordinary holder in due course. 
A) an extraordinary holder in due course. 
B) an ordinary check passer. 
C) an ordinary holder. 
D) an ordinary holder in due course.

Question 17

In good faith and for value,Carol receives from Dick a negotiable bearer in?strument.Carol does not know that Dick stole the instrument.Carol is

Accepted Answer

A) an HDC,because the good faith requirement applies only to the holder,not the transferor. 
B) not an HDC,because the instrument is a bearer instrument. 
C) not an HDC,because Dick did not acquire the instrument for value. 
D) not an HDC,because Dick did not acquire the instrument in good faith. 
A) an HDC,because the good faith requirement applies only to the holder,not the transferor. 
B) not an HDC,because the instrument is a bearer instrument. 
C) not an HDC,because Dick did not acquire the instrument for value. 
D) not an HDC,because Dick did not acquire the instrument in good faith.

Question 18

DeAnn is the payee of a bearer instrument-a promissory note in the amount of $10,000.LeBurt offers to irrigate DeAnn's ranch next week in ex?change for the note.DeAnn agrees and delivers the note to LeBurt.LeBurt is

Accepted Answer

A) an HDC,because he promised to perform services at a future date. 
B) an HDC,because the transferor was the original payee on the note. 
C) not an HDC,because he did not acquire the instrument in good faith. 
D) not an HDC,because he did not yet give value for the instrument. 
A) an HDC,because he promised to perform services at a future date. 
B) an HDC,because the transferor was the original payee on the note. 
C) not an HDC,because he did not acquire the instrument in good faith. 
D) not an HDC,because he did not yet give value for the instrument.

Question 19

Jackson pays Phil in good faith for a promissory note.Phil warrants that the draft has not been altered.This warranty is a

Accepted Answer

A) presentment warranty. 
B) consideration warranty. 
C) conditional warranty. 
D) fixed warranty. 
A) presentment warranty. 
B) consideration warranty. 
C) conditional warranty. 
D) fixed warranty.

Question 20

If a note is payable in thirty days,payment is due by noon on the thir?tieth day.

Accepted Answer

A) True 
 B)False

Exam 24: Transferability and Liability

Paula wants to transfer a check to Quinn.The check is defective if it

Wilson buys a promissory note from Oli.The note is due on December 5.December 5 is a Sunday.The note

Kris transfers a note,on which Liu is the maker,to Mia,who takes it for value and in good faith.Mia knows that Kris breached the contract underlying the note,giving Liu a defense against payment.With respect to this note,Mia is

When an instrument is dishonored,only written notice is sufficient to hold secondary parties liable.

Beth,an accountant for Credits & Debits,acquires a negotiable instru?ment from Ellen by promis?ing to pay its face value in thirty days.Beth ac?quires the status of an HDC when she

Will is the payee of a promissory note for $500.James offers to mow Will's lawn five times in exchange for the note.Will agrees.After fifth time James mows Will's lawn,James is

Entrepreneur Auto Rentals owes Sole Saver Auto Dealership $2,000.Entrepreneur executes a note to Sole Saver as security for the debt.This security

Elinor performs ten hours of house cleaning for Zack in exchange for a promissory note for $400.At the time that Elinor accepts the note,she is aware that bankruptcy proceedings are being filed against Zack.Elinor

One of the transfer warranties is that the instrument has not been materially altered.

A fictitious payee is a payee on a negotiable instrument whom the maker or drawer does not intend to have an interest in the instrument.

A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

A person who transfers an instrument for consideration makes certain warranties to the transferee.

If an instrument is incomplete when the maker signs it,then the maker's obligation to pay is according to the terms as stated at that time.

Jeff's grandmother is the payee of a promissory note for $7,500.Jeff's grandmother gives Jeff the note for his sixteenth birthday.Jeff is

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim,defense,or defect.With respect to this check,Kilroy is

In good faith and for value,Carol receives from Dick a negotiable bearer in?strument.Carol does not know that Dick stole the instrument.Carol is

DeAnn is the payee of a bearer instrument-a promissory note in the amount of $10,000.LeBurt offers to irrigate DeAnn's ranch next week in ex?change for the note.DeAnn agrees and delivers the note to LeBurt.LeBurt is

Jackson pays Phil in good faith for a promissory note.Phil warrants that the draft has not been altered.This warranty is a

If a note is payable in thirty days,payment is due by noon on the thir?tieth day.

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