Deck 24: Liabilities of Parties and Holders in Due Course

Question 1

The UCC specifies that for drawers on uncertified checks, a presentment within thirty days after the date of the check is presumed to be reasonable.

Answer 1

True

Question 2

A(n) _____ is a claim a party being sued makes against the party suing.

A) counter
B) setoff
C) fiduciary
D) imposition

Answer 2

B

Question 3

A holder for value and in good faith with no knowledge of dishonor, defenses, or claims, or that paper is overdue is known as a _____.

A) holder in presentment
B) holder in due course
C) holder in good faith
D) holder in liability

Answer 3

B

Question 4

An agent who signs an instrument indicating a representative capacity will not have personal liability on the instrument.

Question 5

Normally, an unauthorized signature binds the person whose name is used.

Question 6

Which of the following is an example of a dishonor?

A) Dan forgets to make presentment of a check but demands money from Ben.
B) Dan issues a check to Ben, who takes it to the bank after six months and the bank declines.
C) Dan issues a check to Ben but it is returned by the bank due to insufficient funds.
D) Dan demands payment of a note from Ben before the due date and Ben declines.

Question 7

Which of the following is true of primary liability?

A) A maker of notes does not carry a primary liability.
B) A drawee is liable only by writing "accepted" and signing the draft.
C) A person with primary liability is liable to pay before the instrument is due.
D) An acceptor of drafts does not carry a primary liability.

Question 8

Which of the following best describes the shelter principle?

A) It is a rule giving the holder rights of holder in due course.
B) It is a claim a party being sued makes against the party suing.
C) It is a rule that protects a holder from being sued.
D) It is a rule which protects the holder from judicial punishment.

Question 9

A(n) _____ refers to a person in a relationship of trust and confidence, such as a trustee.

A) presidiary
B) judiciary
C) fiduciary
D) intermediary

Question 10

A check is considered dishonored if it is returned to the holder stamped "insufficient funds."

Question 11

Which of the following best describes protest?

A) It is a notice of dishonor that is lodged in a court of law by a third-party.
B) It is a notice of dishonor that is issued by the drawer.
C) It is a notice of dishonor that is issued by the maker.
D) It is a notice of dishonor that is certified by a public official authorized to do so.

Question 12

A check that is deposited into a bank account can only be from that particular bank.

Question 13

A maker of a note is primarily liable and may be called on for payment.

Question 14

Explain presentment in detail.

Question 15

In order to attain the specially favored status of being a holder in due course, the holder need not give value for the paper.

Question 16

_____ is the demand for acceptance or payment made on the maker, acceptor, drawee, or other payor of commercial paper.

A) Indorsement
B) Abatement
C) Endorsement
D) Presentment

Question 17

Return of a check lacking a proper indorsement constitutes dishonor.

Question 18

Generally, the rights of the holder of consumer paper are subject to all claims, defenses, and setoffs of the original purchaser arising from the consumer transaction.

Question 19

Parties whose signatures do not appear on negotiable instruments are liable for their payment.

Question 20

Indorsers and drawers are the parties whose liability on negotiable instruments is ordinarily primary.