Exam 25: Transferability and Holder in Due Course

To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper indorsement of the check is

The effect of a conditional indorsement on the back of an instrument is the same as the effect of conditional language that appears on its face.

A special indorsement does not specify a particular indorsee.

Blythe, an accountant for Credits & Debits, acquires a negotiable instrument from Eton by promising to pay its face value in thirty days. Blythe acquires the status of an HDC when she

Under the UCC, a transfer of rights under a contract is a negotiation.

An instrument payable to two persons jointly requires the indorsement of only one of the payees for negotiation.

A person who accepts an instrument that has been completed without knowing that it was incomplete when issued can take it as an HDC.

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

For an ordinary holder to become an HDC, the holder must have acted honestly in the process of acquiring the instrument.

Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie. The price of the shares is constantly fluctuating. Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase. Eppie agrees. Fund Investments buys the stock when the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services, which takes the check in good faith and without notice of Fund Investments's act. Hasty later learns that Fund Investments was not authorized to fill in the check for $1,000 over the price. Is Hasty an HDC If so, for how much

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,00-the alteration is obvious-and transfers it to eReady Sets, Inc., in exchange for a 3D HD TV. eReady deposits the check in its bank account at First Town Bank. HDCs of this check include

A negotiable instrument can only be transferred by negotiation.

If a person purchasing an instrument does not know and has no reason to know that it has been dishonored, the person cannot become an HDC.

Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is

Bob receives a check from Chris. Without Bob's knowledge, Dan indorses it in his own name and deposits it in his account at Elm City Bank. In Bob's subsequent suit against the bank for the money, the court will most likely rule in favor of

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is

Ivy signs a check payable to Jon and gives it to him. Jon indorses the back, and transfers the check to Ked. To negotiate the check to Luis, Ked must

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

Velma transfers a note by signing it and delivering it to Woz. Woz is

Indorsement can convert an order instrument into a bearer instrument