Exam 27: Negotiation, Holder in Due Course, and Defenses

Which of the following types of endorsements attempt to either limit the transferability of the instrument or control the manner of payment under the instrument?

In Russia a transaction involving a promissory note is a legitimate documentary transaction.

A payee may not be a holder in due course.

The words, "Pay to Allan Smith" followed by the endorser's signature create a(n) ______ endorsement.

An endorsement that places a condition on payment is referred to as which of the following types of endorsements?

"Check Cashing Business." Susan owns and operates a check cashing business. A regular customer, Bob, comes in and cashes a $2,000 check issued by ABC Trucking. The day after Susan cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the checks she cashed for Bob had been stolen. At the time she took the check, Susan was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Susan decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took Bob's check, she took a check from another customer, Maurice. It was later discovered that the check, which was four months old, was the subject of a dispute between Maurice and the issuer of the check for whom Maurice had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Maurice had stopped payment on the checks. Susan claimed that as a holder in due course, she was entitled to payment on both checks -What is the effect of the alteration of the check on Susan's status as a holder in due course?

Which of the following is false regarding the elements a party must meet in order to be considered a holder in due course?

"House Painting." Susie Smith signed a check agreeing to pay, "Annie Greene, Mary Hodge," $1,000. The payment was for painting her house. A problem with the note was that it spelled Annie's last name, "Greene," whereas Annie spells it simply, "Green." Annie and Mary were having a disagreement regarding how to split up the funds for painting the house. Annie proceeded to sign the check on the back, "Annie Green," and presented it to Bill Brown to satisfy a debt that she owed him. Bill Brown endorsed the check on the back, "Bill Brown, without recourse," and gave it to his nephew, Sam, who took it to the bank for payment. Meanwhile, Susie has stopped payment on the check because following a rain storm, all the paint on the house looked spotted. Mary is unhappy because she did not obtain any of the funds and stated that Annie could not legally endorse the instrument because it misspelled her name and also because she, Mary, did not sign it. -Which of the following is true regarding the complaint of Mary that she did not also endorse the instrument?

An instrument that reads, "Pay to the order of Jones and Green," establishes ________ payees.

Which of the following are types of unqualified endorsements?

"House Painting." Susie Smith signed a check agreeing to pay, "Annie Greene, Mary Hodge," $1,000. The payment was for painting her house. A problem with the note was that it spelled Annie's last name, "Greene," whereas Annie spells it simply, "Green." Annie and Mary were having a disagreement regarding how to split up the funds for painting the house. Annie proceeded to sign the check on the back, "Annie Green," and presented it to Bill Brown to satisfy a debt that she owed him. Bill Brown endorsed the check on the back, "Bill Brown, without recourse," and gave it to his nephew, Sam, who took it to the bank for payment. Meanwhile, Susie has stopped payment on the check because following a rain storm, all the paint on the house looked spotted. Mary is unhappy because she did not obtain any of the funds and stated that Annie could not legally endorse the instrument because it misspelled her name and also because she, Mary, did not sign it. -Which of the following is true regarding the status of Sam?

A(n) ___________ is a person receiving an endorsement.

"Lost Check." Susan Jones teaches business law at Learn-A-Lot University. Learn-A-Lot requested that all of the teachers ask the students to wear on the day of the first football game T-shirts with "Learn-A-Lot University Football" printed on the front. All of the teachers were asked to sell the shirts in class. A student, Bobby, wrote a check to Susan for $10 for payment for one of the shirts. Bobby, however, put Susan Jones as the payee. Susan wanted to turn the check over to the school, so on the back of the check, she wrote, "Susan Jones, without recourse." She then gave the check to the treasurer for Learn-A-Lot University. Unfortunately, the treasurer for Learn-A-Lot dropped the check on the ground as she was going to the bank. A student, Shifty, found the check and promptly took it to the bank and cashed it. The treasurer, Bernice, did not want to get into trouble, so she asked Susan to personally cover the check because she said that Susan had endorsed the check on the back guaranteeing payment. -What type of endorsement did Susan make on the back of the check?

Discuss whether or not you believe that our law should recognize holder in due course status with its resulting rights.

Which of the following is the principle that if an item is transferred from one person to another, the transferee acquires all the rights to transfer or have in the item?

Which of the following is true regarding the requirement that a party take an instrument for value in order to be considered a holder in due course?

Which of the following was the result in Mid-Atlantic Tennis Courts Inc., v. Citizens Bank and Trust Company of Maryland, the case in the text in which an employee of the plaintiff fraudulently deposited into his own account at the defending bank checks for which the plaintiff was payee, and the plaintiff sued the defending bank for checks endorsed by it "for deposit only" or with no endorsement?

"Check Cashing Business." Susan owns and operates a check cashing business. A regular customer, Bob, comes in and cashes a $2,000 check issued by ABC Trucking. The day after Susan cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the checks she cashed for Bob had been stolen. At the time she took the check, Susan was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Susan decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took Bob's check, she took a check from another customer, Maurice. It was later discovered that the check, which was four months old, was the subject of a dispute between Maurice and the issuer of the check for whom Maurice had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Maurice had stopped payment on the checks. Susan claimed that as a holder in due course, she was entitled to payment on both checks -What is the effect of Susan receiving notice the day after she cashed the check for Bob that the check had been stolen?

Which of the following is an instrument payable to cash or whoever is in possession of the instrument?

In the event of a misspelled name, how may the holder endorse the document?