Question 1

If SecondFactor could collect on the note in general, could it collect from Dubious personally? What should he have done to avoid this problem?

Accepted Answer

Probably no, FirstFactor cannot collect from Dubious personally. Where the signature of an obligor is ambiguous so that it may be interpreted to mean that the signer is personally liable or to mean that he is signing it in his representative capacity, the signer may adduce (bring in) evidence that it was not intended that he should be personally liable, but rather that he was only an agent of a corporate principal. The signature is ambiguous.
 To avoid the problem Dubious should make clear that he is signing only in his representative capacity; he should have signed: "Dubious, President, DUC Inc."

Question 2

Which of the following must a transferee fulfill in order to be a holder in due course?

Accepted Answer

A)  Have a valid reason to question the instrument's authenticity 
B)  Be able to issue an enquiry into the face value of a negotiable instrument 
C)  Should not hold a negotiable instrument 
D)  Should accept that the instrument contains an unauthorized signature or has been altered 
E)  Should be able to question whether the instrument has been dishonored or not 
A)  Have a valid reason to question the instrument's authenticity 
B)  Be able to issue an enquiry into the face value of a negotiable instrument 
C)  Should not hold a negotiable instrument 
D)  Should accept that the instrument contains an unauthorized signature or has been altered 
E)  Should be able to question whether the instrument has been dishonored or not D

Question 3

Of the following, _____ is a real defense.

Accepted Answer

A)  failure of consideration 
B)  prior payment 
C)  breach of warranty 
D)  fraudulent alteration 
E)  duress 
A)  failure of consideration 
B)  prior payment 
C)  breach of warranty 
D)  fraudulent alteration 
E)  duress D

Question 4

In the case of Carter & Grimsley v. Omni Trading, Inc., Carter argues that its motion for summary judgment should have been granted because:

Accepted Answer

A)  as a holder in due course, it has the right to recover on the checks from the drawer, Omni. 
B)  it was a "promise of performance," not yet performed. 
C)  this retainer was a contract for future legal services. 
D)  when the attorney-client relationship is created by payment of a fee or retainer, the contract is executory. 
E)  contract for future legal services should be treated the same as other executory contracts. 
A)  as a holder in due course, it has the right to recover on the checks from the drawer, Omni. 
B)  it was a "promise of performance," not yet performed. 
C)  this retainer was a contract for future legal services. 
D)  when the attorney-client relationship is created by payment of a fee or retainer, the contract is executory. 
E)  contract for future legal services should be treated the same as other executory contracts.

Question 5

If the holder knows that the paper has already been paid, she cannot enforce it.

Accepted Answer

A) True 
 B)False

Question 6

Will SecondFactor be able to collect from DUC, Inc.? Explain.

Accepted Answer

Yes, SecondFactor should be able to coll

Question 7

The _____ provides that the transferee of an instrument acquires the same rights as the transferor had.

Accepted Answer

A)  general rule on forged indorsements 
B)  dishonest employee rule 
C)  imposter rule 
D)  fictitious payee rule 
E)  shelter rule 
A)  general rule on forged indorsements 
B)  dishonest employee rule 
C)  imposter rule 
D)  fictitious payee rule 
E)  shelter rule

Question 8

The imposter rule provides that the transferee of an instrument acquires the same rights as the transferor had.

Accepted Answer

A) True 
 B)False

Question 9

If blanks are filled or an incomplete instrument is otherwise completed, subsection (c) places the loss upon the party who altered it by unauthorized completion.

Accepted Answer

A) True 
 B)False

Question 10

A note is due October 12, 20XX. On October 21, 20XX Able takes rightful possession of the note. He cannot be a holder in due course.

Accepted Answer

A) True 
 B)False

Question 11

For the "value" requirement to be a holder in due course, an executory promise suffices.

Accepted Answer

A) True 
 B)False

Question 12

Explain how 'forgery' is a real defense to an action by a holder in due course.

Accepted Answer

Forgery is a real defense to an action b

Question 13

The Triffin v. Somerset Valley Bank case is based on the _____.

Accepted Answer

A)  shelter rule 
B)  imposter rule 
C)  dishonest employee rule 
D)  fictitious payee rule 
E)  general rule on forged indorsements 
A)  shelter rule 
B)  imposter rule 
C)  dishonest employee rule 
D)  fictitious payee rule 
E)  general rule on forged indorsements

Question 14

Uniform Commercial Code 3-103(4) defines _____ as "honesty in fact and the observance of reasonable commercial standards of fair dealing."

Accepted Answer

A)  negotiation 
B)  good faith 
C)  dishonor 
D)  real defense 
E)  a promise 
A)  negotiation 
B)  good faith 
C)  dishonor 
D)  real defense 
E)  a promise

Question 15

Real defenses are good against a holder in due course.

Accepted Answer

A) True 
 B)False

Question 16

Dishonor means that instrument is not paid when it is presented to the party who should pay it.

Accepted Answer

A) True 
 B)False

Question 17

Fraudulent alteration of an instrument is a defense even against a holder in due course.

Accepted Answer

A) True 
 B)False

Question 18

The rules about holders in due course are meant to constrain inappropriate negotiation of commercial paper.

Accepted Answer

A) True 
 B)False

Question 19

Raul makes a check payable to "Cash," thinking to get cash at his bank. But Raul drops the check and loses it. Carlene finds it. She becomes a holder and can cash the check.

Accepted Answer

A) True 
 B)False

Question 20

Notice is limited to the receipt of an explicit statement.

Accepted Answer

A) True 
 B)False

Exam 24: Holder in Due Course and Defenses

If SecondFactor could collect on the note in general, could it collect from Dubious personally? What should he have done to avoid this problem?

Which of the following must a transferee fulfill in order to be a holder in due course?

Of the following, _____ is a real defense.

In the case of Carter & Grimsley v. Omni Trading, Inc., Carter argues that its motion for summary judgment should have been granted because:

If the holder knows that the paper has already been paid, she cannot enforce it.

Will SecondFactor be able to collect from DUC, Inc.? Explain.

The _____ provides that the transferee of an instrument acquires the same rights as the transferor had.

The imposter rule provides that the transferee of an instrument acquires the same rights as the transferor had.

If blanks are filled or an incomplete instrument is otherwise completed, subsection (c) places the loss upon the party who altered it by unauthorized completion.

A note is due October 12, 20XX. On October 21, 20XX Able takes rightful possession of the note. He cannot be a holder in due course.

For the "value" requirement to be a holder in due course, an executory promise suffices.

Explain how 'forgery' is a real defense to an action by a holder in due course.

The Triffin v. Somerset Valley Bank case is based on the _____.

Uniform Commercial Code 3-103(4) defines _____ as "honesty in fact and the observance of reasonable commercial standards of fair dealing."

Real defenses are good against a holder in due course.

Dishonor means that instrument is not paid when it is presented to the party who should pay it.

Fraudulent alteration of an instrument is a defense even against a holder in due course.

The rules about holders in due course are meant to constrain inappropriate negotiation of commercial paper.

Raul makes a check payable to "Cash," thinking to get cash at his bank. But Raul drops the check and loses it. Carlene finds it. She becomes a holder and can cash the check.

Notice is limited to the receipt of an explicit statement.

Introduction to Law and Legal Systems

Corporate Social Responsibility and Business Ethics

Courts and the Legal Process

Constitutional Law and Us Commerce

Administrative Law

Criminal Law

Introduction to Tort Law

Introduction to Contract Law

The Agreement

Real Assent

Consideration

Legality

Form and Meaning

Third-Party Rights

Discharge of Obligations

Remedies

Introduction to Sales and Leases

Title and Risk of Loss

Performance and Remedies

Products Liability

Bailments and the Storage, Shipment, and Leasing of Goods

Nature and Form of Commercial Paper

Negotiation of Commercial Paper

Liability and Discharge

Legal Aspects of Banking

Consumer Credit Transactions

Secured Transactions and Suretyship

Mortgages and Nonconsensual Liens

Bankruptcy

Introduction to Property: Personal Property and Fixtures

Intellectual Property

The Nature and Regulation of Real Estate and the Environment

The Transfer of Real Estate by Sale

Landlord and Tenant Law

Estate Planning: Wills, Estates, and Trusts

Insurance

Relationships Between Principal and Agent

Liability of Principal and Agent; Termination of Agency

Partnerships: General Characteristics and Formation

Partnership Operation and Termination

Hybrid Business Forms

Corporation: General Characteristics and Formation

Legal Aspects of Corporate Finance

Corporate Powers and Management

Securities Regulation

Corporate Expansion, State and Federal Regulation of Foreign Corporations, and Corporate Dissolution

Antitrust Law

Unfair Trade Practices and the Federal Trade Commission

Employment Law

International Law

Liability and Regulation of Accountants

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