Question 1

Indorsements that state a condition to the right of the indorsee to receive payment do not affect the right of the indorsee to enforce the instrument.

Accepted Answer

A) True 
 B)False

Question 2

A person who takes an instrument containing a restrictive indorsement, "Pay to Jack Black in Trust for Mel Gibbs,":

Accepted Answer

A)  may not pay the proceeds to the indorsee without the due approval of the indorser. 
B)  may pay the proceeds to the indorsee paying due regard to whether the indorsee violates a fiduciary duty to the indorser. 
C)  may pay the proceeds to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser. 
D)  may pay the proceeds to the indorser only with the approval and concurrence of the indorsee. 
A)  may not pay the proceeds to the indorsee without the due approval of the indorser. 
B)  may pay the proceeds to the indorsee paying due regard to whether the indorsee violates a fiduciary duty to the indorser. 
C)  may pay the proceeds to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser. 
D)  may pay the proceeds to the indorser only with the approval and concurrence of the indorsee.

Question 3

In which of the following situations is an instrument termed as overdue?

Accepted Answer

A)  Where a check was made out 60 days ago. 
B)  Where there is a default in payment of interest on a note, but not in the payment of the principal. 
C)  Where the principal on a note is due in installments and an installment has not been paid. 
D)  Where a note dated January 1 is payable "30 days after date" and is paid on January 31. 
A)  Where a check was made out 60 days ago. 
B)  Where there is a default in payment of interest on a note, but not in the payment of the principal. 
C)  Where the principal on a note is due in installments and an installment has not been paid. 
D)  Where a note dated January 1 is payable "30 days after date" and is paid on January 31.

Question 4

A person who makes a completely executory promise, in return for a negotiable instrument, has given value for it.

Accepted Answer

A) True 
 B)False

Question 5

When a holder makes a blank indorsement of a negotiable instrument that is bearer paper, what legal effect does this have?

Accepted Answer

A)  There is no effect-bearer paper does not need to be indorsed. 
B)  The bearer negotiates it by transfer alone and no further indorsement is necessary for negotiation. 
C)  The instrument is no longer negotiable, as it has been altered. 
D)  The instrument is converted into order paper. 
A)  There is no effect-bearer paper does not need to be indorsed. 
B)  The bearer negotiates it by transfer alone and no further indorsement is necessary for negotiation. 
C)  The instrument is no longer negotiable, as it has been altered. 
D)  The instrument is converted into order paper.

Question 6

Sonia through fraudulent representations induced Gracie to execute a negotiable note payable to Sonia. Sonia is a holder in due course.

Accepted Answer

A) True 
 B)False

Question 7

Under Revised Article 3, a person is a(n) _____ if she is in possession of an instrument that is payable to bearer or made payable to an identified person and she is that identified person.

Accepted Answer

A)  payor 
B)  issuer 
C)  bailor 
D)  holder 
A)  payor 
B)  issuer 
C)  bailor 
D)  holder

Question 8

Ahmed Cohen received a check for $5,000 for a used car he sold. The check was marked "pay to the order of Ahmed Cohen." On back of this check he wrote, in his handwriting, "Ahmed Cohen." This has the legal effect of:

Accepted Answer

A)  making this instrument non-negotiable. 
B)  making this instrument void. 
C)  making this instrument order paper. 
D)  making this instrument bearer paper. 
A)  making this instrument non-negotiable. 
B)  making this instrument void. 
C)  making this instrument order paper. 
D)  making this instrument bearer paper.

Question 9

In general, the material alteration of a completed negotiable instrument:

Accepted Answer

A)  is a complete defense against a holder in due course. 
B)  is no defense whatsoever against a holder in due course. 
C)  means that a holder in due course can enforce the instrument against the maker, but only according to its original tenor. 
D)  means that a holder in due course can enforce the instrument as modified. 
A)  is a complete defense against a holder in due course. 
B)  is no defense whatsoever against a holder in due course. 
C)  means that a holder in due course can enforce the instrument against the maker, but only according to its original tenor. 
D)  means that a holder in due course can enforce the instrument as modified.

Question 10

The negotiation of an instrument made in breach of duty is subject to _____ before the instrument has been negotiated to a transferee who can qualify as a holder in due course

Accepted Answer

A)  rescission 
B)  remission 
C)  restitution 
D)  reformation 
A)  rescission 
B)  remission 
C)  restitution 
D)  reformation

Question 11

Rachel's father gave her a check drawn on his checking account marked "payable to the order of Rachel Stern". This instrument is order paper, because:

Accepted Answer

A)  the instrument uses the word "order." 
B)  the instrument names a specific payee. 
C)  the instrument was properly negotiated to Rachel. 
D)  the instrument was an order to pay cash. 
A)  the instrument uses the word "order." 
B)  the instrument names a specific payee. 
C)  the instrument was properly negotiated to Rachel. 
D)  the instrument was an order to pay cash.

Question 12

An instrument that is indorsed with a _____ indorsement remains "order paper."

Accepted Answer

A)  special 
B)  blank 
C)  restrictive 
D)  conditional 
A)  special 
B)  blank 
C)  restrictive 
D)  conditional

Question 13

A check becomes overdue:

Accepted Answer

A)  30 days after its date. 
B)  60 days after its date. 
C)  90 days after its date. 
D)  after a "reasonable" period of time, in the light of trade practice. 
A)  30 days after its date. 
B)  60 days after its date. 
C)  90 days after its date. 
D)  after a "reasonable" period of time, in the light of trade practice.

Question 14

If an order instrument is transferred without indorsement, then the instrument:

Accepted Answer

A)  is deemed to have been negotiated and the bank can qualify as a holder. 
B)  has not been negotiated and the transferee cannot qualify as a holder. 
C)  is deemed to have been negotiated and the transferee can qualify as a holder. 
D)  has been transferred and the bank and the transferee can qualify as a holder. 
A)  is deemed to have been negotiated and the bank can qualify as a holder. 
B)  has not been negotiated and the transferee cannot qualify as a holder. 
C)  is deemed to have been negotiated and the transferee can qualify as a holder. 
D)  has been transferred and the bank and the transferee can qualify as a holder.

Question 15

Order paper that is indorsed in blank becomes bearer paper.

Accepted Answer

A) True 
 B)False

Question 16

What are the three significant effects resulting from the indorsement of a negotiable instrument?

Accepted Answer

First, indorsement is necessary for the

Question 17

Which of the following is order paper?

Accepted Answer

A)  A check made out "to the order of cash." 
B)  A note payable to the order of X and indorsed in blank by X. 
C)  A note made out to Y's order and indorsed "Pay to Z, Y." 
D)  A receipt for a payment made by Z. 
A)  A check made out "to the order of cash." 
B)  A note payable to the order of X and indorsed in blank by X. 
C)  A note made out to Y's order and indorsed "Pay to Z, Y." 
D)  A receipt for a payment made by Z.

Question 18

Value is identical to simple consideration.

Accepted Answer

A) True 
 B)False

Question 19

Svetlana Mills gives a check "payable to the order of Svetlana Mills," to a shopkeeper for some groceries. Here, the check would be considered as negotiated only upon the fulfillment of which of the following conditions?

Accepted Answer

A)  The check should be indorsed by the shopkeeper. 
B)  The check should bear the name of the shopkeeper. 
C)  Svetlana should indorse the check in the name of the shopkeeper. 
D)  Svetlana should indorse the check in her own name. 
A)  The check should be indorsed by the shopkeeper. 
B)  The check should bear the name of the shopkeeper. 
C)  Svetlana should indorse the check in the name of the shopkeeper. 
D)  Svetlana should indorse the check in her own name.

Question 20

Which of the following indorsements is a restrictive indorsement?

Accepted Answer

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

Exam 32: Negotiation and Holder in Due Course

Indorsements that state a condition to the right of the indorsee to receive payment do not affect the right of the indorsee to enforce the instrument.

A person who takes an instrument containing a restrictive indorsement, "Pay to Jack Black in Trust for Mel Gibbs,":

In which of the following situations is an instrument termed as overdue?

A person who makes a completely executory promise, in return for a negotiable instrument, has given value for it.

When a holder makes a blank indorsement of a negotiable instrument that is bearer paper, what legal effect does this have?

Sonia through fraudulent representations induced Gracie to execute a negotiable note payable to Sonia. Sonia is a holder in due course.

Under Revised Article 3, a person is a(n) _____ if she is in possession of an instrument that is payable to bearer or made payable to an identified person and she is that identified person.

Ahmed Cohen received a check for $5,000 for a used car he sold. The check was marked "pay to the order of Ahmed Cohen." On back of this check he wrote, in his handwriting, "Ahmed Cohen." This has the legal effect of:

In general, the material alteration of a completed negotiable instrument:

The negotiation of an instrument made in breach of duty is subject to _____ before the instrument has been negotiated to a transferee who can qualify as a holder in due course

Rachel's father gave her a check drawn on his checking account marked "payable to the order of Rachel Stern". This instrument is order paper, because:

An instrument that is indorsed with a _____ indorsement remains "order paper."

A check becomes overdue:

If an order instrument is transferred without indorsement, then the instrument:

Order paper that is indorsed in blank becomes bearer paper.

What are the three significant effects resulting from the indorsement of a negotiable instrument?

Which of the following is order paper?

Value is identical to simple consideration.

Svetlana Mills gives a check "payable to the order of Svetlana Mills," to a shopkeeper for some groceries. Here, the check would be considered as negotiated only upon the fulfillment of which of the following conditions?

Which of the following indorsements is a restrictive indorsement?

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

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