Question 1

An indorsement that contains some sort of instruction from the indorser is known as a ________.

Accepted Answer

A)  nonrestrictive indorsement 
B)  restrictive indorsement 
C)  qualified indorsement 
D)  special indorsement 
A)  nonrestrictive indorsement 
B)  restrictive indorsement 
C)  qualified indorsement 
D)  special indorsement B

Question 2

A(n) ________ indorsement includes the notation "without recourse" or similar language that disclaims liability of the indorser.

Accepted Answer

A)  qualified 
B)  unqualified 
C)  promissory 
D)  competent 
A)  qualified 
B)  unqualified 
C)  promissory 
D)  competent A

Question 3

Which of the following is true of an allonge?

Accepted Answer

A)  It must contain the name of the payee to be valid. 
B)  It must be accepted by the payee to be valid. 
C)  It must be affixed to the indorsement. 
D)  It must be provided only on demand. 
A)  It must contain the name of the payee to be valid. 
B)  It must be accepted by the payee to be valid. 
C)  It must be affixed to the indorsement. 
D)  It must be provided only on demand. C

Question 4

Nonnegotiable instruments are negotiated by holders in due course.

Accepted Answer

A) True 
 B)False

Question 5

A special indorsement does not specify to whom the indorser intends the instrument to be payable.

Accepted Answer

A) True 
 B)False

Question 6

An instrument that is not payable to a specific payee or indorsee is known as a(n) ________.

Accepted Answer

A)  order paper 
B)  bearer paper 
C)  allonge 
D)  draft 
A)  order paper 
B)  bearer paper 
C)  allonge 
D)  draft

Question 7

An indorsement with just the indorsee's signature on it, and a specific payee, would be an example of a nonrestrictive indorsement.

Accepted Answer

A) True 
 B)False

Question 8

For an order paper to be negotiated there must be delivery and indorsement.

Accepted Answer

A) True 
 B)False

Question 9

An instrument that is not payable to a specific payee or indorsee is called an order paper.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following qualifications renders a person a holder in due course of a negotiable instrument?

Accepted Answer

A)  he takes the negotiable instrument for value 
B)  he is subject to claims and defenses against the transferor 
C)  he is in possession of an instrument issued in his name 
D)  he is in possession of an instrument issued in another's name 
A)  he takes the negotiable instrument for value 
B)  he is subject to claims and defenses against the transferor 
C)  he is in possession of an instrument issued in his name 
D)  he is in possession of an instrument issued in another's name

Question 11

A separate piece of paper attached to an instrument on which an indorsement is written is known as a(n) ________.

Accepted Answer

A)  bill of exchange 
B)  allonge 
C)  supplement 
D)  appendage 
A)  bill of exchange 
B)  allonge 
C)  supplement 
D)  appendage

Question 12

The holder of a negotiable instrument has the same rights as the holder of an ordinary nonnegotiable contract.

Accepted Answer

A) True 
 B)False

Question 13

An indorsement whereby the indorser promises to pay the holder or any subsequent indorser the amount of the instrument if the maker, drawer, or acceptor defaults is referred to as a(n) ________.

Accepted Answer

A)  competent indorsement 
B)  promissory indorsement 
C)  unqualified indorsement 
D)  qualified indorsement 
A)  competent indorsement 
B)  promissory indorsement 
C)  unqualified indorsement 
D)  qualified indorsement

Question 14

Under the Uniform Commercial Code's ________ requirement, a person cannot qualify as a holder in due course (HDC) if he or she has noticed that the instrument is overdue.

Accepted Answer

A)  no evidence of forgery, alteration, or irregularity 
B)  taking in good faith 
C)  taking without notice of defect 
D)  taking for value 
A)  no evidence of forgery, alteration, or irregularity 
B)  taking in good faith 
C)  taking without notice of defect 
D)  taking for value

Question 15

A qualified indorsement protects subsequent indorsers from liability.

Accepted Answer

A) True 
 B)False

Question 16

A qualified indorsement puts limited liability on the indorsee.

Accepted Answer

A) True 
 B)False

Question 17

Unqualified indorsements are considered negotiable instruments.

Accepted Answer

A) True 
 B)False

Question 18

A(n) ________ is an indorsement that has no instructions or conditions attached to the payment of the funds.

Accepted Answer

A)  indorsement in trust 
B)  indorsement for deposit 
C)  nonrestrictive indorsement 
D)  restrictive indorsement 
A)  indorsement in trust 
B)  indorsement for deposit 
C)  nonrestrictive indorsement 
D)  restrictive indorsement

Question 19

A special indorsement is negotiable by indorsement and delivery.

Accepted Answer

A) True 
 B)False

Question 20

The transfer of rights under a nonnegotiable contract is known as a(n) ________.

Accepted Answer

A)  assignment 
B)  negotiation 
C)  indorsement 
D)  dishonored instrument 
A)  assignment 
B)  negotiation 
C)  indorsement 
D)  dishonored instrument

Exam 23: Holder in Due Course and Transferability

An indorsement that contains some sort of instruction from the indorser is known as a ________.

A(n) ________ indorsement includes the notation "without recourse" or similar language that disclaims liability of the indorser.

Which of the following is true of an allonge?

Nonnegotiable instruments are negotiated by holders in due course.

A special indorsement does not specify to whom the indorser intends the instrument to be payable.

An instrument that is not payable to a specific payee or indorsee is known as a(n) ________.

An indorsement with just the indorsee's signature on it, and a specific payee, would be an example of a nonrestrictive indorsement.

For an order paper to be negotiated there must be delivery and indorsement.

An instrument that is not payable to a specific payee or indorsee is called an order paper.

Which of the following qualifications renders a person a holder in due course of a negotiable instrument?

A separate piece of paper attached to an instrument on which an indorsement is written is known as a(n) ________.

The holder of a negotiable instrument has the same rights as the holder of an ordinary nonnegotiable contract.

An indorsement whereby the indorser promises to pay the holder or any subsequent indorser the amount of the instrument if the maker, drawer, or acceptor defaults is referred to as a(n) ________.

Under the Uniform Commercial Code's ________ requirement, a person cannot qualify as a holder in due course (HDC) if he or she has noticed that the instrument is overdue.

A qualified indorsement protects subsequent indorsers from liability.

A qualified indorsement puts limited liability on the indorsee.

Unqualified indorsements are considered negotiable instruments.

A(n) ________ is an indorsement that has no instructions or conditions attached to the payment of the funds.

A special indorsement is negotiable by indorsement and delivery.

The transfer of rights under a nonnegotiable contract is known as a(n) ________.

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