Deck 27: Negotiation, holder in Due Course, and Defenses

Question 1

Which of the following did the court determine on appeal in Wawel Savings Bank v.Jersey Tractor Trailer Training Inc. ,the case in the text in which a lender who perfected an interest in a debtor's collateral claimed to have priority in bankruptcy over an entity who later entered into an agreement whereby it purchased rights to the debtor's accounts receivables?

A)The court ruled in favor of the purchaser of receivables on the basis that the agreement the lender had with the debtor did not expressly prohibit the sale of receivables.
B)The court remanded the case for a determination as to whether the purchaser of receivables was a holder in due course or a purchaser of instruments,in which case it would prevail.
C)The court ruled in favor of the purchaser of receivables on the basis that an immediate transaction for value was involved.
D)Under the "first in time" rule,the court ruled in favor of the lender who perfected the interest in the debtor's collateral.
E)Under the "first to file" rule,the court ruled in favor of the lender who perfected the interest in the debtor's collateral.

Answer 1

C
Explanation: A)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
B)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
C)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
D)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
E)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.

Question 2

A party cannot be a holder in due course of a non-negotiable instrument.

Answer 2

True

Question 3

A transaction involving a promissory note is a legitimate documentary transaction in Russia.

Answer 3

True

Question 4

What is meant by the term "delivery" in the process of negotiation?

A)The passing of a warranty that the recipient is a holder in due course.
B)The physical handing of an instrument from someone entitled to it,to the person intended to receive it.
C)The passing of a warranty that the recipient is a holder.
D)The passing of a warranty that the instrument is collectible.
E)The passing of a warranty that an instrument qualifies as a negotiable instrument.

Question 5

In Southwest Bank,the case in the text in which an employee of the plaintiff fraudulently deposited into her personal account at the defending bank checks for which the plaintiff was payee.The plaintiff sued the defending bank for checks endorsed by the employee "for deposit only" and with no endorsement from the plaintiff.Which of the following was the result in this case?

A)The court ruled that because employee fraud was involved,the defending bank held no responsibility to the plaintiff.
B)The court ruled that because a fraud was involved,regardless of whether or not it was on the part of plaintiff's employee,the defending bank held no responsibility to the plaintiff.
C)The court ruled that because the defending bank was merely the depositary bank,it held no responsibility to the plaintiff.
D)The court ruled that the defending bank was liable to the plaintiff.
E)The court ruled that the defending bank was entitled to assume that the depositor was entitled to deposit the checks.

Question 6

At any date after the expressed due date on a time instrument,the instrument becomes overdue.

Question 7

An endorsement to prohibit further endorsement prohibits further transfer.

Question 8

Once an instrument is negotiable,it remains negotiable.

Question 9

Negotiability can be destroyed by a conditional endorsement.

Question 10

A person who engages in fraud may not obtain the rights of an HDC.

Question 11

An instrument is dishonored when a party refuses to pay the instrument,such as when a bank refuses to pay because insufficient funds exist.

Question 12

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Question 13

When an instrument is payable to joint payees,the endorsements of all listed payees are required before the instrument can be negotiated.

Question 14

In order for a holder to acquire the rights and privileges of an HDC,an instrument must be transferred directly from the HDC to the holder.

Question 15

Which of the following is a written document signed by the maker or drawer with an unconditional promise or order to pay a certain sum in money on demand or at a specified time to the order of bearer?

A)An acknowledged instrument.
B)A delivered instrument.
C)A contract instrument.
D)A negotiable instrument.
E)A holder instrument.

Question 16

The transferability of an instrument may be limited by a restrictive endorsement.

Question 17

The requirement that a holder in due course must take an instrument for value can be satisfied by receiving an instrument as a gift.

Question 18

Allison worked for ABC Company as the company treasurer.She took 20 of ABC Company's checks,labeled as belonging to ABC Company.Over the course of one year,she signed and mailed the checks to American Express,her own credit card company,to pay her personal credit card debt.Assuming the court follows Watson Coatings Inc. ,v.American Express Travel Services Inc. ,the case in the text,which of the following is the most likely result in a lawsuit by ABC Company against American Express to recover the amounts of the checks?

A)ABC Company will prevail because American Express should have realized that fraud was involved from the fact that the checks were ABC Company checks.
B)American Express will prevail and will not be required to return funds.
C)ABC Company will prevail because fraud was involved.
D)American Express will have to return half of the funds because the parties were equally at fault,American Express for taking the checks,and ABC Company for not more carefully supervising its employee.
E)ABC Company will prevail because American Express,as a payee,does not qualify as a holder in due course.

Question 19

A payee may not be a holder in due course.

Question 20

When a consumer credit contract is transferred to a subsequent holder,the holder obtains the rights of an HDC.

Question 21

Which of the following is a version of a qualified endorsement?

A)Special and allonge,but not blank.
B)Blank,special,and allonge.
C)Special and blank,but not allonge.
D)Blank and allonge,but not special.
E)There are no qualified endorsements.

Question 22

Which kind of endorsement places a condition on payment?

A)Trust endorsement.
B)Conditional endorsement.
C)Endorsement to prohibit further endorsement.
D)Conditional bearer endorsement.
E)Bearer endorsement.

Question 23

For negotiation,which of the following types of paper require delivery and an endorsement by the holder?

A)Bearer
B)Transfer
C)Acknowledgement
D)Delivery
E)Order

Question 24

What is the effect of an unqualified,blank endorsement?

A)It turns an allonge into an endorsement.
B)It turns a blank endorsement into a special endorsement.
C)It turns previous bearer paper into order paper.
D)It turns previous order paper into bearer paper.
E)It turns an endorsement into an allonge.

Question 25

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

A)An order instrument.
B)A delivery instrument.
C)A transfer instrument.
D)A bearer instrument.
E)An acknowledgement instrument.

Question 26

Which of the following are types of unqualified endorsements?

A)Allonge and blank.
B)Allonge and special.
C)Qualified and special.
D)Blank and special.
E)Qualified and blank.

Question 27

Which of the following is the correct term for a person receiving an endorsement?

A)Endorser
B)Transfero r
C)Endorsee
D)Transfere e
E)?Allonge

Question 28

In order to be negotiated,order paper must be ________ as well as ________.

A)Delivered;transferred.
B)Negotiated;held.
C)Endorsed;delivered.
D)Transferred;delivered.
E)Stamped with an allonge;delivered.

Question 29

Which kind of instrument is payable to a specific,named payee?

A)A bearer instrument.
B)A transfer instrument.
C)A delivery instrument.
D)An acknowledgement instrument.
E)An order instrument.

Question 30

Which of the following is the term for a person creating an endorsement?

A)A transferee
B)An endorsee
C)A transferor
D)An allonge
E)An endorser

Question 31

When an instrument is being transferred to an agent or trustee for the benefit of either the endorser or a third party,which kind of endorsement is used?

A)Trust endorsement.
B)Endorsement to prohibit further endorsement.
C)Conditional endorsement.
D)Bearer endorsement.
E)Conditional bearer endorsement.

Question 32

For negotiation,which of the following types of paper require only delivery of the instrument to the holder by the payee?

A)Acknowledgement
B)Order
C)Transfer
D)Bearer
E)Delivery

Question 33

Which of the following words are necessary for an endorsement to be considered qualified?

A)Addition of the words,"trust endorsement."
B)Addition of the words,"restricted endorsement."
C)Addition of the words,"special endorsement."
D)Addition of the words,"without recourse."
E)Addition of the words,"conditional entrustment."

Question 34

The statement,"Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

A)Trust endorsement.
B)Endorsement to prohibit further endorsement.
C)Conditional bearer endorsement.
D)Conditional endorsement.
E)Bearer endorsement.

Question 35

An)________ endorsement is the endorser's signature along with a named endorsee.

A)Specific
B)Special
C)Qualified
D)Blank
E)Allonge

Question 36

Which of the following is not an example of a restrictive endorsement?

A)The endorsement for deposit or collection only.
B)The conditional endorsement.
C)The endorsement to prohibit further endorsement.
D)The trust endorsement.
E)The endorsement specifying without recourse.

Question 37

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?

A)Special qualified.
B)Blank qualified.
C)Trust.
D)Conditional.
E)Restrictive.

Question 38

If an instrument has no room for an endorsement or if all the room has been taken by previous endorsements,what may be attached?

A)Allonge
B)Special endorsement
C)Acknowledgement
D)Codicil
E)Blank endorsement

Question 39

Which of the following is the payee's or last endorsee's signature and nothing else?

A)An allonge.
B)A qualified endorsement.
C)A restricted endorsement.
D)A special endorsement.
E)A blank endorsement.

Question 40

What kind of endorsement do the words,"Pay to Allan Smith" followed by the endorser's signature create?

A)Special
B)Specific
C)Blank
D)Qualified
E)Allonge

Question 41

Shira purchased a refrigerator from ABC Appliance store for $800.She takes the refrigerator home and discovers that it is defective.She calls ABC Appliance store and tells them that she would like to return the refrigerator.ABC Appliance store tells her that they have assigned the promissory note she provided the store in order to purchase the refrigerator to a finance company and that the finance company,as a holder in due course,is not subject to defenses.Which of the following is true regarding the rights of parties?

A)The finance company is subject to the defenses of Shira because of the Federal Trade Commission rule created to protect consumers.
B)Shira can assert her defenses against the finance company only if she can prove that the finance company had knowledge that ABC Appliance store sold defective equipment from time to time.
C)ABC Appliance store is correct in that Shira cannot assert her defenses against the finance company.
D)Shira can assert her defenses against the finance company only if she agrees to arbitrate the dispute.
E)Shira can assert her defenses against the finance company only because she gave notice of the problem within 5 days of the sale.

Question 42

Which is the correct term for a party who is in possession of an instrument that is payable to the party or to the bearer of the instrument?

A)A holder.
B)A transferee.
C)A bearer.
D)A payee.
E)An issuer.

Question 43

Which of the following does the UCC define as,"honesty in fact and the observance of reasonable commercial standards of fair dealing?"

A)Objective reasonableness.
B)Reasonable investigation.
C)Subjective reasonableness.
D)Good faith.
E)Commercial standards.

Question 44

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

A)The shelter principle.
B)The holder principle.
C)The transfer principle.
D)The transferee principle.
E)The transferor principle.

Question 45

Which of the following was the result in Michael J.Kane,Jr.v.Grace Kroll,the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son,but later stopped payment on the check because her son said he could not repay her?

A)The plaintiff was allowed to recover on a contract theory although he was not a holder in due course.
B)The plaintiff was not allowed to recover because,although he was a holder in due course,the stop payment order negated his entitlement to payment.
C)The plaintiff was allowed to recover because he was a holder in due course.
D)The plaintiff was not allowed to recover because the defendant established a lack of consideration to her.
E)The plaintiff was not allowed to recover because the stop payment order prevented the plaintiff from being a holder in due course.

Question 46

According to the UCC,which of the following is true regarding when a person has notice of a fact?

A)Under the UCC a person has notice of a fact under the following two circumstances: 1)when the person has actual knowledge of the fact,and 2)when the person receives notice or notification of the fact.
B)Under the UCC a person has notice of a fact only when the person has signed a verification to the effect that notice was received.
C)Under the UCC a person has notice of a fact only when the person has actual knowledge of the fact.
D)Under the UCC a person has notice of a fact only when the person receives written notification either through regular mail or electronic means.
E)Under the UCC a person has notice of a fact under the following three circumstances: 1)when the person has actual knowledge of the fact,2)when the person receives notice or notification of the fact,and 3)when the person has reason to know the fact exists.

Question 47

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

A)The party must have begun performance on a promise and have provided consideration.
B)The party must provide consideration.
C)The party must have provided a bargained-for promise.
D)The party must have provided consideration or received the note as a gift.
E)The party must take the instrument in exchange for a promise that has already been performed.

Question 48

An instrument that reads,"Pay to the order of Jones or Green," is payable to ________ payees.

A)Consecutive
B)Joint
C)Alternate
D)Concurrent
E)Alternative

Question 49

Which of the following was the result in the Case Opener,involving the check taken in good faith by a market,later returned to the market based on a stop payment order,and purchased from the market by the plaintiff who sued Cigna,the issuer of the check?

A)The plaintiff was allowed to recover under the shelter principle and holder-in-due-course status.
B)The plaintiff was not allowed to recover because the market misrepresented the status of the check.
C)The plaintiff was allowed to recover because the market misrepresented the status of the check.
D)The plaintiff was not allowed to recover because of the shelter principle and holder-in-due-course status.
E)The plaintiff was not allowed to recover because he took the check knowing of a problem.

Question 50

Which of the following is the result if a payee who receives an instrument with missing information completes the missing information in a way that is inconsistent with the intent of issuer,and the instrument has been clearly materially altered?

A)The instrument is considered materially altered,but it only prevents transfer to a holder in due course if the transferee participated in the material alteration.
B)The person taking the instrument cannot become a holder in due course.
C)The instrument is considered materially altered,but it only prevents transfer to a holder in due course if the holder in due course had knowledge that the payee had done the alteration.
D)There is no effect so long as the payee can establish that he or she did not receive any more consideration than that to which the payee was entitled.
E)The alteration does not prevent a person taking the flawed instrument from becoming a holder in due course.

Question 51

Which of the following is true regarding the concept of negotiable instruments in Japan?

A)The Japanese Commercial Code recognizes the term negotiable instruments.
B)Japanese law does not regulate investment securities.
C)The law governing securities in Japan is technical with little ambiguity or arbitrary application.
D)The Japanese have a single legislative act governing both commercial paper and investment securities.
E)The Japanese recognize the legal concept of yuka shoken,which means "valuable securities."

Question 52

Which of the following does not prevent a holder from being a holder in due course?

A)Notice that the instrument has been dishonored.
B)Notice that the instrument was issued as part of a series that is in default.
C)Notice that the instrument has been altered or contains an unauthorized signature.
D)Notice that an employee other than the treasurer of a company signed an instrument.
E)Notice that the instrument is overdue.

Question 53

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

A)A special qualified endorsement.
B)A blank endorsement.
C)A special endorsement.
D)A blank qualified endorsement.
E)An ineffective endorsement because the words "without recourse" have no effect.

Question 54

If an issuer forgets to write the date on a check,what is the effect?

A)The payee may write in the date consistent with the intent of the issuer and may transfer the check to a holder in due course.
B)The check is no good,cannot be completed by anyone,and should be destroyed.
C)The payee may write in the date consistent with the intent of the issuer,but must put a notation on the check to the effect that it was altered.
D)The check is good only if the payee can get in touch with the issuer and have the issuer fill in the appropriate date.
E)The payee may write in the date consistent with the intent of the issuer,but may not transfer the check to a holder in due course.

Question 55

Which of the following is true regarding how a holder may take an instrument for value,but not become a holder in due course?

A)The UCC provides that the only method by which a holder may take an instrument for value but not become a holder in due course is when the holder acquires an instrument through taking over an estate.
B)The UCC does not recognize circumstances under which a holder may take an instrument for value but not become a holder in due course,although under common law,a person who acquired an instrument through taking over an estate was classified as a holder but not a holder in due course.
C)The UCC provides that a holder may take an instrument for value but not become a holder in due course under the following two circumstances: 1)when the holder purchases the instrument at judicial sale or under legal process,and 2)when the holder acquires an instrument through taking over an estate.
D)The UCC provides that the only method by which a holder may take an instrument for value but not become a holder in due course is when the holder purchases the instrument at judicial sale or under legal process.
E)The UCC provides that a holder may take an instrument for value but not become a holder in due course under the following three circumstances: 1)when the holder purchases the instrument at judicial sale or under legal process,2)when the holder acquires an instrument through taking over an estate,and 3)when the holder purchases the instrument as part of a bulk transaction not in the regular course of business of the transferor.

Question 56

Was the check properly delivered to Brad?

A)Yes,because both Brad and the bank are considered holders in due course.
B)Yes,because it was bearer paper,delivery occurred whenever possession was taken.
C)No,because he was not intended to receive it.
D)Yes,because it was order paper,delivery occurred whenever possession was taken.
E)Yes,but only because it was thereafter presented to the bank and cashed.

Question 57

Which of the following may endorse an instrument made payable to a legal entity such as a partnership?

A)The bookkeeper only.
B)The managing partner only.
C)Any authorized representative.
D)The financial officer only.
E)The treasurer only.

Question 58

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

A)The party must be a holder of a complete and authentic negotiable instrument.
B)The holder must take the instrument without notice of defects.
C)The holder must take the instrument for value.
D)The holder must either pay for the instrument or receive it as a gift.
E)The holder must take the instrument in good faith.

Question 59

How may the holder endorse the document in the event of a misspelled name?

A)Endorsement is impossible in such a situation.
B)With the holder's actual name,with the misspelled name,or with the misspelled name followed by the actual name.
C)Only with the holder's actual name.
D)Only with the misspelled name.
E)Only with the misspelled name followed by the actual name.

Question 60

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

A)Alternative
B)Consecutive
C)Joint
D)Alternate
E)Concurrent

Question 61

An endorsement that is followed by a statement that restricts payment,and can be used as a defense for the endorser against the endorsee,is which of the following?

A)Special unqualified endorsement.
B)Special qualified endorsement.
C)Trust endorsement.
D)Endorsement that prohibits further endorsement.
E)Conditional endorsement.

Question 62

Which of the following is true regarding the complaint of Marney that she did not also endorse the instrument?

A)She is incorrect,but only if it can be established that Hiro Murakami lacked knowledge that she had not given her consent to the form of the endorsement.
B)She is correct because both names are required in order to provide legal endorsement.
C)She is incorrect because Annie properly endorsed the note,and only her signature was needed.
D)She is correct in that her name was needed for legal endorsement,but that is only the case because of the misspelling of Annie's name.
E)She is correct because regardless of whether the payees are listed with no designation as to whether they are alternate or joint,or whether the words,"or" or "and" are used to designated payees,any listed payee must endorse a note in order for it to be properly payable.

Question 63

An endorsement that is the endorser's signature followed by a named endorsee,who then becomes the holder of the instrument,is what type of endorsement?

A)Special unqualified.
B)Conditional.
C)Blank unqualified.
D)Blank qualified.
E)Special qualified.

Question 64

[House Painting] Graciela Reyes signed a check agreeing to pay,"Annie Greene,Marney Harris," $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 Marney 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 Hiro Murakami to satisfy a debt that she owed him.Hiro Murakami endorsed the check on the back,"Hiro Murakami,without recourse," and gave it to his nephew,Nate,who took it to the bank for payment.Meanwhile,Graciela has stopped payment on the check because,following a rainstorm,all the paint on the house looked spotted.Marney 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,Marney,did not sign it.
Which of the following is true regarding Marney's claim that the endorsement by Annie was illegal because the note misspelled Annie's name?

A)Marney is correct.
B)Marney is correct,but only because two payees are listed.
C)Marney is incorrect.
D)Marney is correct,but only because Annie signed the note,"Green," instead of "Greene," as such was on the note.
E)Marney is incorrect unless she can prove that Graciela intentionally and purposefully spelled the name wrong to prevent negotiation.

Question 65

One who possesses a cashier's check payable from him to someone else is which of the following?

A)Endorser.
B)Bearer.
C)Holder in due course.
D)Holder.
E)Possessor.

Question 66

When is a time instrument not considered overdue?

A)A time instrument is always overdue upon any missed payment.
B)When a party misses an installment payment on the principal.
C)When a party misses an interest payment on the instrument.
D)When a party fails to make a lump-sum payment by the due date.
E)When a party does not make payment on either the principal or interest.

Question 67

Under which of the following circumstances does a holder taking an instrument for value not become a holder in due course?

A)If the holder purchases the instrument at a judicial sale or under legal process.
B)If the holder takes the instrument for payment of a preceding claim.
C)If the holder exchanges the instrument for an irrevocable obligation to a third party.
D)If the holder performs the promise for which the instrument was issued.
E)If the holder acquires a security interest or some other lien in the instrument.

Question 68

[Check Issues] Kelsey owns and operates a currency exchange.A regular customer,Rafe,comes in and cashes a $2,000 check issued by ABC Trucking.The day after Kelsey 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 Rafe had been stolen.At the time she took the check,Kelsey 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.Kelsey 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 Rafe's check,she took a check from another customer,Brett.It was later discovered that the check,which was four months old,was the subject of a dispute between Brett and the issuer of the check for whom Brett had done some work.The issuer claimed that the work was improperly done.Both ABC Trucking and the issuer of the check to Brett had stopped payment on the checks.Kelsey claimed that as a holder in due course,she was entitled to payment on both checks.
What is the effect of Kelsey receiving notice the day after she cashed the check for Rafe that the check had been stolen?

A)The notice prevents her from being a holder in due course only if Rafe had been convicted of check cashing offenses in the past since she should have checked his criminal record.
B)The notice has no effect on her status as holder in due course because it was provided after she cashed the check.
C)The notice prevents her from being a holder in due course because it was presented to a business;only individuals can avoid the effect of notice of theft by cashing a check prior to receiving notice.
D)The notice prevents her from being a holder in due course only if she subjectively knew that Rafe had been charged criminally with check cashing violations in the past.
E)The notice prevents her from being a holder in due course.

Question 69

An endorsement that restricts the instrument such that it must be collected by a bank for the endorser or for a particular account and cannot be cashed is which of the following?

A)Endorsement for deposit or collection only.
B)Special qualified endorsement.
C)Conditional endorsement.
D)Endorsement that prohibits further endorsement.
E)Trust endorsement.

Question 70

What is the effect on Kelsey's status as a holder in due course in taking from the customer the check that was four months old?

A)There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for one year.
B)There is no effect on her status as a holder in due course because an instrument such as a check is only considered overdue if it is outstanding for 150 days.
C)She would not be considered a holder in due course because a check is considered overdue 90 days after its date.
D)There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for 180 days.
E)It has no effect because a check is never considered overdue.

Question 71

Which of the following is true regarding Nate's rights in relation to the check?

A)As a holder in due course,Nate may demand payment from either Graciela,Annie,or Marney.
B)As a holder,Nate may demand payment from either Graciela,Annie,or Marney.
C)Nate may not demand payment from either Graciela,Annie,or Marney.
D)As a holder in due course,Nate may demand payment from either Graciela or Annie,but not Marney.
E)As a holder,Nate may demand payment from either Graciela or Annie,but not Marney.

Question 72

An endorsement that is either the payee's or the last endorsee's signature,payable to whoever has possession of the instrument,is which type of endorsement?

A)Restrictive.
B)Blank unqualified.
C)Special unqualified.
D)Special qualified.
E)Blank qualified.

Question 73

A holder may still become a holder in due course if he or she is aware of which of the following defects?

A)The instrument contains an unauthorized signature.
B)The instrument is overdue.
C)There is a claim to the instrument.
D)The instrument has been dishonored.
E)The instrument contains a misspelled name.

Question 74

For an HDC to take an instrument "in good faith," how does the UCC define good faith?

A)Good faith is not defined;it is left to the judgment of the individual HDC.
B)Whether the holder himself acted reasonably when taking the instrument.
C)Using the proper degree of caution that an objective,reasonable holder would have.
D)Whether the holder himself acted honestly when taking the instrument.
E)Under reasonable commercial standards of fair dealing.

Question 75

What is the effect of the designation,"Hiro Murakami,without recourse?"

A)It has no effect on anyone,including,but not limited to,any subsequent holder.
B)It has no effect on any subsequent holder.
C)It means that Hiro Murakami does not provide any guarantees to subsequent holders if the instrument is later dishonored.
D)It means that Hiro Murakami is providing that neither he nor the person who transferred the instrument to him can be held further liable to any subsequent holder.
E)It means that Hiro Murakami is providing that any subsequent holder cannot be held liable.

Question 76

An instrument that becomes overdue at any time after the expressed due date on it is which type of instrument?

A)Dishonored instrument.
B)Overdue instrument.
C)Altered instrument.
D)Demand instrument.
E)Time instrument.

Question 77

What happens when an instrument lists two payees but is silent as to whether they are joint or alternative?

A)The instrument is non-negotiable and may not be endorsed by either payee.
B)Courts interpret the instrument as containing joint payees,and the endorsements of both listed payees are required to negotiate it.
C)The instrument may be endorsed by one or the other payee,but may not be endorsed by both payees.
D)Only the endorsement of the first listed payee is required to negotiate it.
E)Courts interpret the instrument as containing alternative payees,and the endorsement of only one listed payee is required to negotiate it.

Question 78

Would the school be able to require that Jenna cover the amount of the check based on the law of negotiable instruments?

A)Yes,because she signed on the back with a special qualified endorsement.
B)Yes,because she signed on the back regardless of the type of endorsement.
C)No,because the check was not properly delivered to Brad.
D)Yes,because she signed on the back with a blank unqualified endorsement.
E)No,because she signed on the back using the words,"without recourse."

Question 79

What is the effect of the check's alteration on Kelsey's status as a holder in due course?

A)On the basis that the law does not want to unduly burden holders,the alteration will affect her status as a holder in due course only because the instrument was written for an amount in excess of $500.
B)The alteration has no effect because a holder is not charged with examining an instrument presented for payment.
C)The alteration will affect her status as a holder in due course only if the issuer can establish that it was not negligent in allowing a thief to gain access resulting in the alteration.
D)The alteration will affect her status as a holder in due course only if she had been put on notice of prior criminal behavior in the past on the part of Rafe.
E)The alteration will likely prohibit her from being a holder in due course.

Question 80

Which statement is true regarding the status of Nate?

A)He is not a holder nor is he a holder in due course because he did not provide value.
B)He is not a holder in due course because he did not provide value.
C)The fact that a gift was involved does not prevent Nate from being a holder in due course so long as other requirements are satisfied.
D)The fact that a gift was involved does not prevent Nate from being a holder in due course so long as other requirements are satisfied and Nate is not a minor.
E)He is not a holder because he did not provide value.