Question 1

Which of the following is an example of restrictive endorsements recognized under Article 3?

Accepted Answer

A)  "Pay to Bruce Zucker in Trust for Jay Zucker." 
B)  "Pay to Bruce Zucker Only." 
C)  "Pay to Jay Zucker on the condition that he completes construction of my house by November 1, 2012." 
D)  "Pay to the order of my account." 
A)  "Pay to Bruce Zucker in Trust for Jay Zucker." 
B)  "Pay to Bruce Zucker Only." 
C)  "Pay to Jay Zucker on the condition that he completes construction of my house by November 1, 2012." 
D)  "Pay to the order of my account."

Question 2

A holder in due course does not take free of the _____, which go to the validity of the instrument or of claims that develop after he becomes a holder.

Accepted Answer

A)  personal defenses 
B)  relative defenses 
C)  procedural defenses 
D)  real defenses 
A)  personal defenses 
B)  relative defenses 
C)  procedural defenses 
D)  real defenses

Question 3

Which of the following is a personal defense against a holder in due course?

Accepted Answer

A)  Fraud in the essence 
B)  Forgery 
C)  Breach of contract 
D)  Minority or infancy 
A)  Fraud in the essence 
B)  Forgery 
C)  Breach of contract 
D)  Minority or infancy

Question 4

A claim in recoupment is a claim of the person obligated on the instrument against the original payee of the instrument.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is generally true about the Federal Trade Commission's (FTC) regulations of the holder in due course rule?

Accepted Answer

A)  Some states have eliminated the holder in due course rule by repealing the previous version of Article 3 and refusing to adopt the new version. 
B)  The FTC has seriously limited the rule's impact in consumer credit situations in which the consumer signs a note or an installment sales contract, or gets financing from a third party. 
C)  These changes in the holder in due course rule reflect the economic power and political influence of business interests, especially banks. 
D)  Overall, the FTC's changes in the holder in due course rule are insignificant, especially in consumer cases. 
A)  Some states have eliminated the holder in due course rule by repealing the previous version of Article 3 and refusing to adopt the new version. 
B)  The FTC has seriously limited the rule's impact in consumer credit situations in which the consumer signs a note or an installment sales contract, or gets financing from a third party. 
C)  These changes in the holder in due course rule reflect the economic power and political influence of business interests, especially banks. 
D)  Overall, the FTC's changes in the holder in due course rule are insignificant, especially in consumer cases.

Question 6

In some circumstances, Article 3 allows a person to become a holder by negotiation, even though the transfer of possession is involuntary.

Accepted Answer

A) True 
 B)False

Question 7

John received a check from his employer marked "pay to the order of John Jones." John used this check to pay for groceries from ABC Foods. He wrote on the back of the check: "pay to ABC Foods, for groceries". Was this check properly negotiated?

Accepted Answer

A)  No, because the statement that the check was for payment to ABC Foods defeats this negotiation. 
B)  No, because John did not indorse the check. 
C)  Yes, because John transferred possession of the check and ABC Foods acted in good faith. 
D)  Yes, because a holder's signature is not always needed in order to negotiate a check. 
A)  No, because the statement that the check was for payment to ABC Foods defeats this negotiation. 
B)  No, because John did not indorse the check. 
C)  Yes, because John transferred possession of the check and ABC Foods acted in good faith. 
D)  Yes, because a holder's signature is not always needed in order to negotiate a check.

Question 8

In the context of overdue instruments, if a due date for the principal has been accelerated:

Accepted Answer

A)  the instrument is overdue when the court passes a judgment to that effect. 
B)  the instrument is overdue on the day after the grace period of seven days from the accelerated due date. 
C)  the instrument is overdue on the day after the accelerated due date. 
D)  the instrument is overdue on the day of the due date. 
A)  the instrument is overdue when the court passes a judgment to that effect. 
B)  the instrument is overdue on the day after the grace period of seven days from the accelerated due date. 
C)  the instrument is overdue on the day after the accelerated due date. 
D)  the instrument is overdue on the day of the due date.

Question 9

_____ are legal reasons for avoiding or reducing liability of an individual who is liable on a negotiable instrument.

Accepted Answer

A)  Personal defenses 
B)  Procedural defenses 
C)  Real defenses 
D)  Excuse defenses 
A)  Personal defenses 
B)  Procedural defenses 
C)  Real defenses 
D)  Excuse defenses

Question 10

Which of the following is bearer paper?

Accepted Answer

A)  A check payable to the order of X and specially indorsed to Y. 
B)  A check payable to the order of X and indorsed in blank by X. 
C)  A check payable to the order of cash and specially indorsed by the person who received it. 
D)  A check payable to the order of cash to Y. 
A)  A check payable to the order of X and specially indorsed to Y. 
B)  A check payable to the order of X and indorsed in blank by X. 
C)  A check payable to the order of cash and specially indorsed by the person who received it. 
D)  A check payable to the order of cash to Y.

Question 11

What are the general requirements to become a holder in due course?

Accepted Answer

In order to become a holder in due cours

Question 12

In which of the following situations has the holder of a negotiable instrument not given value for it?

Accepted Answer

A)  Where the holder takes the instrument as security for an antecedent claim. 
B)  Where the holder gives a negotiable instrument in return for the one received. 
C)  Where the holder receives the instrument as a gift. 
D)  Where the holder acquires a security interest in the instrument. 
A)  Where the holder takes the instrument as security for an antecedent claim. 
B)  Where the holder gives a negotiable instrument in return for the one received. 
C)  Where the holder receives the instrument as a gift. 
D)  Where the holder acquires a security interest in the instrument.

Question 13

The transfer of an instrument:

Accepted Answer

A)  vests in the transferee any right of the transferor, to enforce the instrument. 
B)  bars the transferee from attaining the rights of the transferor. 
C)  vests in the payor any right of the transferor, to enforce the instrument. 
D)  bars the transferor to pass on his rights to the transferee. 
A)  vests in the transferee any right of the transferor, to enforce the instrument. 
B)  bars the transferee from attaining the rights of the transferor. 
C)  vests in the payor any right of the transferor, to enforce the instrument. 
D)  bars the transferor to pass on his rights to the transferee.

Question 14

What are the four categories of claims listed in Revised Article 3?

Accepted Answer

Revised Article 3 establishes four categ

Question 15

In qualified indorsement, the indorser accepts the liability to make the instrument good, if the maker or drawer defaults on it.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is NOT a defense specified in Revised Article 3?

Accepted Answer

A)  By way of damages 
B)  Real defenses 
C)  Claims to an instrument 
D)  Claims in recoupment 
A)  By way of damages 
B)  Real defenses 
C)  Claims to an instrument 
D)  Claims in recoupment

Question 17

Which of the following indorsements is a blank indorsement?

Accepted Answer

A)  "For Deposit Only" 
B)  "Mel Gibbs" 
C)  "Pay to Jack Black in Trust for Mel Gibbs" 
D)  "Pay to the Order of Jack Black, Mel Gibbs" 
A)  "For Deposit Only" 
B)  "Mel Gibbs" 
C)  "Pay to Jack Black in Trust for Mel Gibbs" 
D)  "Pay to the Order of Jack Black, Mel Gibbs"

Question 18

Jackie Collins is issued a check payable to the order of Jacky Collens. She takes the check to the bank. In order to cash the check she has to:

Accepted Answer

A)  sign either Jackie Collins or Jacky Collens. 
B)  sign only Jackie Collins. 
C)  sign only Jacky Collens. 
D)  sign both Jackie Collins and Jacky Collens. 
A)  sign either Jackie Collins or Jacky Collens. 
B)  sign only Jackie Collins. 
C)  sign only Jacky Collens. 
D)  sign both Jackie Collins and Jacky Collens.

Question 19

Ordinary nonphysical and nonviolent duress that causes the transfer of a negotiable instrument:

Accepted Answer

A)  prevents its negotiation. 
B)  is a good defense against a holder in due course of the instrument. 
C)  is subject to rescission before the instrument is transferred to a holder in due course. 
D)  is a good defense against the maker of a note. 
A)  prevents its negotiation. 
B)  is a good defense against a holder in due course of the instrument. 
C)  is subject to rescission before the instrument is transferred to a holder in due course. 
D)  is a good defense against the maker of a note.

Question 20

A _____ is a claim of the person obligated on the instrument against the original payee of the instrument.

Accepted Answer

A)  real defense 
B)  personal defense 
C)  claim in recoupment 
D)  claim to an instrument 
A)  real defense 
B)  personal defense 
C)  claim in recoupment 
D)  claim to an instrument

Exam 32: Negotiation and Holder in Due Course

Which of the following is an example of restrictive endorsements recognized under Article 3?

A holder in due course does not take free of the _____, which go to the validity of the instrument or of claims that develop after he becomes a holder.

Which of the following is a personal defense against a holder in due course?

A claim in recoupment is a claim of the person obligated on the instrument against the original payee of the instrument.

Which of the following is generally true about the Federal Trade Commission's (FTC) regulations of the holder in due course rule?

In some circumstances, Article 3 allows a person to become a holder by negotiation, even though the transfer of possession is involuntary.

John received a check from his employer marked "pay to the order of John Jones." John used this check to pay for groceries from ABC Foods. He wrote on the back of the check: "pay to ABC Foods, for groceries". Was this check properly negotiated?

In the context of overdue instruments, if a due date for the principal has been accelerated:

_____ are legal reasons for avoiding or reducing liability of an individual who is liable on a negotiable instrument.

Which of the following is bearer paper?

What are the general requirements to become a holder in due course?

In which of the following situations has the holder of a negotiable instrument not given value for it?

The transfer of an instrument:

What are the four categories of claims listed in Revised Article 3?

In qualified indorsement, the indorser accepts the liability to make the instrument good, if the maker or drawer defaults on it.

Which of the following is NOT a defense specified in Revised Article 3?

Which of the following indorsements is a blank indorsement?

Jackie Collins is issued a check payable to the order of Jacky Collens. She takes the check to the bank. In order to cash the check she has to:

Ordinary nonphysical and nonviolent duress that causes the transfer of a negotiable instrument:

A _____ is a claim of the person obligated on the instrument against the original payee of the instrument.

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Crimes

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business Andformation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, Limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Agencies

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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