Question 1

Negotiating order instruments requires either delivery or indorsement but not both.

Accepted Answer

A) True 
 B)False  False

Question 2

A holder cannot become an HDC if he or she has no?tice of any claim to the instrument or defense against it.

Accepted Answer

A) True 
 B)False  True

Question 3

Usually, indorsements are qualified indorsements.

Accepted Answer

A) True 
 B)False  False

Question 4

Mortimer negotiates an instrument to Nadia. Negotiation is the transfer of an instrument

Accepted Answer

A)  for valuable consideration under a contract. 
B)  in such form that the transferee becomes a holder. 
C)  pursuant to preliminary contract discussions. 
D)  without the payment of a recognized medium of exchange. 
A)  for valuable consideration under a contract. 
B)  in such form that the transferee becomes a holder. 
C)  pursuant to preliminary contract discussions. 
D)  without the payment of a recognized medium of exchange.

Question 5

Entrepreneur Auto Rentals owes Sole Saver Auto Dealership $20,000. 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 6

An indorsement should be identical to the name of the indorsee, regardless of how the name appears on the instrument.

Accepted Answer

A) True 
 B)False

Question 7

Roderick negotiates a bearer instrument to Shauna by

Accepted Answer

A)  assignment. 
B)  delivery. 
C)  indorsement. 
D)  promising to pay it. 
A)  assignment. 
B)  delivery. 
C)  indorsement. 
D)  promising to pay it.

Question 8

Loren signs a note that states, "Payable in thirty days." The note is dated March 2. Micah buys the note on April 3. Is Micah an HDC of the note? Explain.

Accepted Answer

No. Generally, the time that a due date

Question 9

Erin indorses a check, "Pay to Farmers Cooperative, Inc., if they deliver the grain by May 1, 2015." This is

Accepted Answer

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

Question 10

A purchaser can become an HDC of an instrument even if it is so incomplete that an element of negotiability is lacking.

Accepted Answer

A) True 
 B)False

Question 11

Elinor performs ten hours of house cleaning for Floyd 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 Floyd. Elinor can

Accepted Answer

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

Question 12

Dirk transfers a note by signing it and delivering it to Edwina. Dirk is

Accepted Answer

A)  an indorser. 
B)  an indorsee. 
C)  a promisee. 
D)  a promisor. 
A)  an indorser. 
B)  an indorsee. 
C)  a promisee. 
D)  a promisor.

Question 13

Fact Pattern 26-1B (Questions B8-B10 apply)
Destiny obtains a check payable to her order from Eugenia. Destiny signs the back and adds the notation "without recourse."
-Refer to Fact Pattern 26-1B. Destiny's signature and the notation "without recourse" constitute

Accepted Answer

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

Question 14

A holder takes an instrument for value if he or she inherits an instrument.

Accepted Answer

A) True 
 B)False

Question 15

A transfer by assignment can make it possible for a transferee to receive more rights in the instrument than the prior possessor had.

Accepted Answer

A) True 
 B)False

Question 16

The shelter principle extends the benefits of HDC status and is designed to aid the HDC in readily disposing of the instrument.

Accepted Answer

A) True 
 B)False

Question 17

An indorsement is a signature, with or without additional words or statements.

Accepted Answer

A) True 
 B)False

Question 18

Fact Pattern 26-1B (Questions B8-B10 apply)
Destiny obtains a check payable to her order from Eugenia. Destiny signs the back and adds the notation "without recourse."
-Refer to Fact Pattern 26-1B. After Destiny signs the back and adds the notation "without recourse," she adds, "Pay to Florence." This constitutes

Accepted Answer

A)  a blank qualified indorsement. 
B)  a special qualified indorsement. 
C)  a restrictive indorsement. 
D)  none of the choices. 
A)  a blank qualified indorsement. 
B)  a special qualified indorsement. 
C)  a restrictive indorsement. 
D)  none of the choices.

Question 19

At 1 A.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben buys a $500 promissory note for $50 from Curt. When pre?sented with Ben's demand for payment, Diane, the maker of the note, could successfully claim that Ben

Accepted Answer

A)  acquired the note with notice that it was overdue. 
B)  did not acquire the instrument in good faith. 
C)  did not give value for the instrument. 
D)  none of the choices. 
A)  acquired the note with notice that it was overdue. 
B)  did not acquire the instrument in good faith. 
C)  did not give value for the instrument. 
D)  none of the choices.

Question 20

Baxter obtains a check payable to his order from Chanel. For Baxter to negotiate this order instrument to Darlene requires

Accepted Answer

A)  indorsement and delivery. 
B)  assignment and a promise to pay. 
C)  presentment and dishonor. 
D)  good faith and value. 
A)  indorsement and delivery. 
B)  assignment and a promise to pay. 
C)  presentment and dishonor. 
D)  good faith and value.

Exam 26: Transferability and Holder in Due Course

Negotiating order instruments requires either delivery or indorsement but not both.

A holder cannot become an HDC if he or she has no?tice of any claim to the instrument or defense against it.

Usually, indorsements are qualified indorsements.

Mortimer negotiates an instrument to Nadia. Negotiation is the transfer of an instrument

Entrepreneur Auto Rentals owes Sole Saver Auto Dealership $20,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security

An indorsement should be identical to the name of the indorsee, regardless of how the name appears on the instrument.

Roderick negotiates a bearer instrument to Shauna by

Loren signs a note that states, "Payable in thirty days." The note is dated March 2. Micah buys the note on April 3. Is Micah an HDC of the note? Explain.

Erin indorses a check, "Pay to Farmers Cooperative, Inc., if they deliver the grain by May 1, 2015." This is

A purchaser can become an HDC of an instrument even if it is so incomplete that an element of negotiability is lacking.

Elinor performs ten hours of house cleaning for Floyd 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 Floyd. Elinor can

Dirk transfers a note by signing it and delivering it to Edwina. Dirk is

Fact Pattern 26-1B (Questions B8-B10 apply) Destiny obtains a check payable to her order from Eugenia. Destiny signs the back and adds the notation "without recourse." -Refer to Fact Pattern 26-1B. Destiny's signature and the notation "without recourse" constitute

A holder takes an instrument for value if he or she inherits an instrument.

A transfer by assignment can make it possible for a transferee to receive more rights in the instrument than the prior possessor had.

The shelter principle extends the benefits of HDC status and is designed to aid the HDC in readily disposing of the instrument.

An indorsement is a signature, with or without additional words or statements.

At 1 A.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben buys a $500 promissory note for $50 from Curt. When pre?sented with Ben's demand for payment, Diane, the maker of the note, could successfully claim that Ben

Baxter obtains a check payable to his order from Chanel. For Baxter to negotiate this order instrument to Darlene requires

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