Exam 23: Holder in Due Course and Transferability

Explain the requirement for a holder in due course (HDC) under the Uniform Commercial Code (UCC) that there be no evidence of forgery, alteration, or irregularity with respect to a negotiable instrument.

Which of the following would be a legitimate method to convert an order paper to a bearer paper?

Explain, in as much detail as possible, how an indorsement is made.

Tilda purchases an automobile from Ronston. At the time of sale, Ronston tells Tilda that the car has had only one previous owner and has been driven only 25,000 miles. Tilda, relying on these statements, purchases the car. She pays 10 percent down and signs a promissory note to pay the remainder of the purchase price, with interest, in fifteen equal monthly installments. Ronston transfers the note to Patty. Tilda then discovers that the car has actually had three previous owners and has been driven 250,000 miles. Which of the following is the legal outcome if Patty is a holder in due course (HDC)?

If there is no space for an indorsement on the instrument, a new instrument has to be made to accommodate the indorsement.

Negotiable instruments are used as a substitute for money.

Under which of the following Uniform Commercial Code (UCC) requirements is a holder considered a "holder in due course," given that the holder performs the agreed-upon promise in a negotiable instrument?

The allonge must be affixed to an instrument to be valid.

Which of the following is true of an assignment?

If a virgule is used, both parties are necessary to negotiate the instrument.

Nonrestrictive indorsements contain instructions from the indorser.

Which of the following would constitute the creation of an assignment?

A holder can convert a blank indorsement into a special indorsement by adding his or her signature on it.

Which of the following makes negotiable instruments transferable to a third party?

Explain the transfer of nonnegotiable contracts by assignment.

Which of the following is true of a special indorsement?

A person who takes a negotiable instrument for value, in good faith, and without notice that it is defective or overdue is referred to as a(n) ________.

Which of the following is true of an indorsement to multiple persons using the virgule?

To qualify as an HDC, a person must be the holder of a negotiable instrument that was taken for value.

Which of the following is a similarity between bearer paper and order paper?