Question 1

An instrument that states simply "I.O.U." is not negotiable.

Accepted Answer

A) True 
 B)False

Question 2

A maker of an instrument that is payable at a definite time does not have the option of paying before the stated date.

Accepted Answer

A) True 
 B)False

Question 3

A promissory note can be a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 4

To buy a stuffed cow, Ken executes a check "pay to Laura or bearer" and gives it to Laura, who does not own a stuffed cow. This check is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because it does not indicate a specific payee. 
C)  nonnegotiable, because it may be a joke. 
D)  nonnegotiable, because Laura does not own a stuffed cow. 
A)  negotiable. 
B)  nonnegotiable, because it does not indicate a specific payee. 
C)  nonnegotiable, because it may be a joke. 
D)  nonnegotiable, because Laura does not own a stuffed cow.

Question 5

Universal defenses are good against all holders except HDCs and holders through HDCs.

Accepted Answer

A) True 
 B)False

Question 6

A bearer instrument is an instrument that does not designate a specific payee.

Accepted Answer

A) True 
 B)False

Question 7

A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 8

On a trade acceptance, the drawer is also the payee.

Accepted Answer

A) True 
 B)False

Question 9

Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is

Accepted Answer

A)  negotiable. 
B)  nonnegotiable, because it does not include an express promise to pay. 
C)  nonnegotiable, because it does not recite any consideration. 
D)  nonnegotiable, because it does not state any conditions to payment. 
A)  negotiable. 
B)  nonnegotiable, because it does not include an express promise to pay. 
C)  nonnegotiable, because it does not recite any consideration. 
D)  nonnegotiable, because it does not state any conditions to payment.

Question 10

Rubber stamp signatures can be legally binding signatures.

Accepted Answer

A) True 
 B)False

Question 11

An instrument "payable to bearer" is negotiated by delivery.

Accepted Answer

A) True 
 B)False

Question 12

Ada is the maker of a note, on which Bart is secondarily liable. Cash & Credit Company (C&C) is the current holder of the note. Bart will be obligated to pay the note if

Accepted Answer

A)  Ada defaults on the note. 
B)  C&C breaches a transfer warranty. 
C)  C&C negotiates the note to Delta Collection Agency, a third party. 
D)  C&C presents the note for payment. 
A)  Ada defaults on the note. 
B)  C&C breaches a transfer warranty. 
C)  C&C negotiates the note to Delta Collection Agency, a third party. 
D)  C&C presents the note for payment.

Exam 18: Negotiable Instruments: Transferability Liability

An instrument that states simply "I.O.U." is not negotiable.

A maker of an instrument that is payable at a definite time does not have the option of paying before the stated date.

A promissory note can be a negotiable instrument.

To buy a stuffed cow, Ken executes a check "pay to Laura or bearer" and gives it to Laura, who does not own a stuffed cow. This check is

Universal defenses are good against all holders except HDCs and holders through HDCs.

A bearer instrument is an instrument that does not designate a specific payee.

A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.

On a trade acceptance, the drawer is also the payee.

Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is

Rubber stamp signatures can be legally binding signatures.

An instrument "payable to bearer" is negotiated by delivery.

Ada is the maker of a note, on which Bart is secondarily liable. Cash & Credit Company (C&C) is the current holder of the note. Bart will be obligated to pay the note if

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