Deck 16: Sales and Lease Contracts: Performance, Warranties, and Remedies

Question 1

Banks are required by the UCC to certify the check if a customer has sufficient funds in the account.

Answer 1

False
Explanation: Banks are not required to certify checks [UCC 3-409(d)].

Question 2

Which of the following is an example of a negotiable instrument?

A) Checks
B) Drafts
C) Notes
D) Checks, drafts, and notes
E) Checks and drafts, but not promissory notes

Answer 2

D
Explanation: Under Article 3, the UCC recognizes four specific types of negotiable instruments: notes and certificates of deposits, a highly specialized type of note; and drafts and checks, a highly specialized type of draft (UCC Section 3-104).

Question 3

Negotiation is the transfer of possession to a third party who becomes the holder of the negotiable instrument.

Answer 3

True
Explanation: Negotiation is the transfer of possession to a third party who becomes the holder of the negotiable instrument (UCC Section 3-201).

Question 4

A draft is an order by a drawer to a drawee to pay a payee.

Question 5

Order paper must be delivered but not endorsed in order to be negotiated.

Question 6

Sometimes the depositary is the same bank as the payor bank.

Question 7

If an instrument fails to qualify as a negotiable instrument, that means that the instrument fails to be an enforceable contract.

Question 8

A note is a promise, by the maker of the note, to pay a payee.

Question 9

A bank involved in the check collection process may only be classified as one type of bank during the entire process.

Question 10

The words "pay to cash" are sufficient words of negotiability.

Question 11

The UCC prohibits bank customers from postdating checks.

Question 12

A negotiable instrument must be a conditional order to pay.

Question 13

Which of the following is a written document containing the signature of the creator that makes an unconditional promise or order to pay a sum certain in money at either a time certain or on demand?

A) A negated instrument
B) A promised instrument
C) A negotiable instrument
D) A promissory agreement
E) A negotiable agreement

Question 14

A substitute check is a check that is substituted for a lost check.

Question 15

Money orders are considered checks under the UCC.

Question 16

An automated signature satisfies the UCC requirement that the signature of the creator appear in order for an instrument to be negotiable.

Question 17

The law does not permit an oral negotiable instrument.

Question 18

Which of the following is a substitute for cash?

A) A negated instrument
B) A promised instrument
C) A negotiable instrument
D) A promissory agreement
E) A negotiable oral promise

Question 19

According to the UCC, a check is a special kind of draft.

Question 20

The customer cannot order a stop payment on an electronic fund transfer.

Question 21

A ______ is a specific draft, drawn by the owner of a checking account, ordering the bank to pay the payee from that drawer's account.

A) Promissory contract
B) Certificates of deposit
C) Note
D) Check
E) Time instrument

Question 22

If an instrument is silent as to the time of payment, which of the following is assumed by the UCC?

A) That it is a demand instrument
B) That it is a time instrument
C) That it is a void instrument
D) That it is a voidable instrument
E) That it is a nonnegotiable instrument

Question 23

With a ______________ instrument, payment can be made only at a specific time designated in the future.

A) Time
B) Demand
C) Recourse
D) Nonrecourse
E) Immediate

Question 24

Which of the following was the result on appeal in New Wave Technologies, Inc. v. Legacy Bank of Texas, the case in the text involving whether endorsements of both payees were required in order for the bank involved to properly release funds on a check made out to "Maxim Solutions Group/New Wave Techn" and providing on the back that "Each Payee Must Endorse Exactly As Drawn"?

A) That under the UCC the slash meant "and" resulting in the endorsements of both payees being required before the bank could properly release funds on the check.
B) That the slash was ambiguous and would, therefore, be interpreted to mean "and" resulting in the endorsements of both payees being required before the bank could properly release funds on the check.
C) That the slash was ambiguous and would, therefore, be interpreted to mean "or" resulting in the endorsement of only one payee being required before the bank could properly release funds on the check.
D) That the slash was ambiguous resulting in the check being non-negotiable regardless of how many signatures were on it.
E) That while the check would normally be interpreted to require only one payee, the statement on the back that "Each Payee Must Endorse Exactly As Drawn" resulted in the signature of both payees being required before the bank could properly release funds.

Question 25

Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

A) The instrument states a specific date for payment.
B) The instrument is dated and then states that "payment will be made 5 days after the above date."
C) An instrument that permits an extension of the payment and also a fixed time for payment, but the maker does not have the right to extend the time of payment indefinitely.
D) An instrument that states that "payment will be made 10 days after delivery of the goods."
E) An instrument that permits acceleration of payment and has a fixed date of payment if the acceleration clause is not effected.

Question 26

With a[n] ______________ instrument, the payee or subsequent holder can demand actual payment at any time.

A) Time
B) Demand
C) Recourse
D) Nonrecourse
E) Immediate

Question 27

Which of the following on appeal was the result in DIF Bank Deutsche Investitions Finanz GMBH v. Fluormatic Corporation of America, the case in the text in which the defendant claimed that drafts were not negotiable because they were not payable in a "sum certain" because they were payable in German deutsche marks and did not specify an exchange rate?

A) That the drafts were not negotiable because they were payable in German deutsche marks regardless of whether an exchange rate was specified.
B) That the drafts were not negotiable because they were payable in German deutsche marks and an exchange rate was not specified.
C) That the drafts were not negotiable because they were payable in German deutsche marks, did not specify an exchange rate, and were presented for payment after the exchange rate changed in excess of 5% after the drafts were issued.
D) That the drafts were negotiable but only because they specified an exchange rate.
E) That the drafts were negotiable regardless of whether or not they specified an exchange rate.

Question 28

Which of the following is a draft with respect to which the drawer and drawee are the same bank or branches of the same bank?

A) Cashier's check
B) Traveler's check
C) Certified check
D) Cashier's checks, traveler's checks, and certified checks
E) A cashier's check and a traveler's check, but not a certified check

Question 29

What characteristics must a written document have in order to satisfy the requirement that a negotiable instrument be in writing?

A) A signature by both parties.
B) A signature at the end by the party to be charged.
C) Relative permanence.
D) Movability.
E) Both relative permanence and movability.

Question 30

Which of the following is false regarding the UCC's signature requirement for a negotiable instrument?

A) An "X" will suffice if the party intended that the mark be placed on the instrument and uses that mark to identify himself.
B) A signature may be made by means of a device or machine.
C) A signature may be made manually.
D) The signature of an agent on behalf of the principal binds the principal and satisfies the signature requirement.
E) None of these.

Question 31

Which of the following was the result on appeal in Fernando Tatis v. U.S. Bancorp, the case in the text in which the plaintiff, a major-league baseball player, asked that the defending bank hold his bank statements and failed to notify the bank within 30 days of forgeries by one of his employees?

A) That by agreeing to hold the bank statements the bank impliedly agreed to waive any timely notice of forgeries.
B) That regardless of when notice was received, the plaintiff/depositor was entitled to the return of funds released based on forgeries.
C) That the plaintiff/depositor and the bank would be required to split losses on a 50/50 basis based on comparative principles because they were both at fault.
D) That the plaintiff/depositor could not recover for forgeries made and not reported for more than 30 days after bank statements were made available.
E) That the plaintiff/depositor could not recover because the forgeries were not reported within 30 days of when bank statements were made available and also that by not timely reporting the first forgery, the plaintiff/depositor lost all rights to recover funds lost because of forgeries by the same forger.

Question 32

Which of the following is a promise made by a bank to pay a payee a certain amount of money at a future time?

A) A note
B) A draft
C) A novation
D) A check
E) A certificate of deposit

Question 33

Which of the following is false regarding requirements for an instrument to be negotiable?

A) The instrument must be a written document.
B) The instrument must be signed by the creator of the instrument at the end of the instrument.
C) The instrument must have an unconditional promise or order to pay.
D) The amount to be paid in the instrument must be a sum certain in money.
E) All of these are false.

Question 34

Which of the following is true regarding whether an agent's signature may satisfy the requirement of negotiability that the signature of a maker or drawer appear?

A) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability.
B) An agent's signature on behalf of his or her principal cannot bind the principal and does not satisfy the signature requirement for negotiability.
C) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if specific authorization from the principal allowing the agent to act on the specific transaction at issue is attached to the document.
D) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if the instrument is for an amount over $1,000.
E) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if the instrument is in an amount of $1,000 or less.

Question 35

Which of the following was the result on appeal in The Twin City Bank v. Kenneth Isaacs, the case in the text in which the bank appealed a judgment against it for significant damages after the bank wrongfully held funds of depositors who had been the victim of check forgery?

A) That the bank could not be held liable for damages because it was recouping its own losses.
B) That the bank could not be held liable under common law because of its contractual agreement with the depositors and that the UCC was inapplicable.
C) That the bank could be held liable but only up to $1,000.
D) That the bank could be held liable for actual damages but not for mental anguish.
E) That the bank could be held liable for financial losses and also for mental anguish.

Question 36

Which of the following is an order by a drawer to a drawee to pay a payee?

A) A note
B) A draft
C) A novation
D) A check
E) A certificate of deposit

Question 37

Which of the following is true regarding the relationship, if any, between negotiability and an unconditional promise or order to pay?

A) There is no such requirement in order to find negotiability because a conditional order to pay is sufficient.
B) A promise or order to pay must be specific and not be implied in order for negotiability to be found.
C) Simply acknowledging a debt satisfies the negotiability requirement of an unconditional promise to pay.
D) A common IOU is sufficient to satisfy the negotiability requirement of an unconditional promise to pay.
E) Simply acknowledging a debt satisfies the negotiability requirement of an unconditional promise to pay, and also a common IOU is sufficient to satisfy the negotiability requirement of an unconditional promise to pay.

Question 38

Under the UCC an instrument "payable on demand" as one that ____________

A) States that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder.
B) Does not state any time of payment.
C) Is payable within ten days after presentment.
D) States that it is payable on demand or at sight or otherwise indicates that it is payable at the will of the holder, or does not state any time of payment.
E) States that it is payable on demand or at sight, otherwise indicates that it is payable at the will of the holder; does not state any time of payment; or is payable within ten days after presentment.

Question 39

A certificate of deposit is ___________ of the bank.

A) A note
B) A draft
C) A novation
D) A check
E) A promissory contract

Question 40

Which of the following satisfies the currency requirement for negotiability in this country?

A) U.S. dollars only
B) U.S. dollars or English pounds
C) U.S. dollars, English pounds, or Euros
D) U.S. dollars, English pounds, Euros, and Japanese yen
E) U.S. dollars, English pounds, Euros, Japanese yen, and gold

Question 41

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

A) Only with the misspelled name.
B) Only with the holder's actual name.
C) With the holder's actual name or with the misspelled name.
D) Endorsement is impossible in such a situation.
E) With the misspelled name and also with a statement indicating to any later holder what the correct spelling should have been.

Question 42

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

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

Question 43

What is the effect of an unqualified, blank endorsement?

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

Question 44

Which of the following are types of unqualified endorsements?

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

Question 45

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

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

Question 46

If there is no room on an instrument for an endorsement or if all the room has been taken by previous endorsements, a[n] ______ may be attached.

A) Acknowledgement.
B) Blank Endorsement.
C) Special Endorsement.
D) Allonge.
E) None of these. The instrument can no longer be endorsed.

Question 47

Which of the following is the party ordered to pay on a draft?

A) The drawer.
B) The drawee.
C) The payee.
D) The draftor.
E) The draftee.

Question 48

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

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

Question 49

Which of the following is the party giving the order to pay on a draft?

A) The drawer.
B) The drawee.
C) The payee.
D) The draftor.
E) The draftee.

Question 50

Which of the following governs the transfer of checks between banks?

A) Article 1 of the UCC.
B) Article 2 of the UCC.
C) Article 3 of the UCC.
D) Article 4 of the UCC.
E) Article 5 of the UCC.

Question 51

Which of the following is the transfer of possession of a negotiable instrument to a third party who becomes a holder of the negotiable instrument?

A) Transfer
B) Negotiation
C) Acknowledgement
D) Referral
E) Delivery

Question 52

Which of the following types of paper require delivery and an endorsement by the holder?

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

Question 53

For an instrument to be negotiable, the instrument must indicate that it was created for the purpose of being ______.

A) Transferred
B) Paid
C) Maintained
D) Banked
E) Retained

Question 54

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

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

Question 55

Which of the following is the party who possesses a negotiable instrument payable to the party or to the bearer of the instrument?

A) A holder.
B) A deliverer.
C) A transferor.
D) An acknowledger.
E) An orderee.

Question 56

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

A) The President only.
B) The Chief Executive Officer only.
C) The Chief Financial Officer only.
D) The Treasurer only.
E) Any authorized representative.

Question 57

Negotiable instruments payable to whoever possesses them are known as _______________ instruments.

A) Demand
B) Order
C) Transactional
D) Bearer
E) Payor

Question 58

___________ is a person receiving an endorsement.

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

Question 59

Which of the following types of paper require only a delivery of the instrument to the holder by the payee?

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

Question 60

When a specific payee is named in an instrument, the instrument is known as a[n] ______________ instrument.

A) Demand
B) Order
C) Transactional
D) Bearer
E) Payor

Question 61

In the case of multiple forgeries by the same wrongdoer, if a customer examines a bank statement and does not notify the bank of the first forgery within the time required by the UCC, what is the effect on subsequent forgeries assuming the bank is not negligent?

A) There is no effect because each forgery stands on its own.
B) The customer is barred from recovering on the subsequent forgeries.
C) The customer may recover on the subsequent forgeries if they are reported to the bank within 5 days after the statement showing the forgery is received by the customer.
D) The customer may recover on the subsequent forgeries if they are reported to the bank within 10 days after the statement showing the forgery is received by the customer.
E) The customer may recover on the subsequent forgeries if they are reported to the bank within 15 days after the statement showing the forgery is received by the customer.

Question 62

A ___________ check is a check that is accepted at the bank at which it is drawn.

A) Cashier's.
B) Certified.
C) Acknowledged.
D) Transferred.
E) Drawee.

Question 63

The ______ bank is the bank upon which a check is drawn.

A) Payor.
B) Payee.
C) Depositary.
D) Transfer.
E) Acceptor.

Question 64

Which of the following governs consumer fund transactions?

A) The Electronic Fund Transfer Act of 1978.
B) The Automated Transfer Act of 1990.
C) The Electronic Banking Act of 2000.
D) The Automated Fund Transfer Regulation of 2002.
E) The Uniform Money Services Business Act of 1990.

Question 65

Which of the following is a bank receiving a transferred check during a collection process (excluding the first bank and the last bank)?

A) Depositary.
B) Acknowledging.
C) Collecting.
D) Intermediary.
E) Transferring.

Question 66

In which of the following is the payee of a check a specific person, and the bank draws on itself?

A) Certified.
B) Agreed.
C) Acknowledged.
D) Cashier's.
E) Promise.

Question 67

If a check is not presented to a bank within ____________ of its date, the check is considered stale check.

A) 30 Days.
B) 90 Days.
C) 6 Months.
D) 9 Months.
E) None of these because under the UCC, a check cannot be considered a stale check.

Question 68

Generally, assuming no negligence on the part of the victim, when an endorsement on a check has been forged and properly reported to the bank, which party is the party ultimately liable for the loss?

A) The drawer.
B) The first party to accept the forged instrument.
C) The first legitimate endorser of the instrument.
D) The bank of the first party to accept the forged instrument.
E) The bank of the drawer even if proper notice was given of the forgery.

Question 69

A bank may determine that ______________ or later is the cut-off hour for handling checks.

A) Noon.
B) 1:00 p.m.
C) 2:00 p.m.
D) 3:00 p.m.
E) 4:00 p.m.

Question 70

Which of the following is the party receiving the money from the draft?

A) The drawer.
B) The drawee.
C) The payee.
D) The draftor.
E) The draftee.

Question 71

A ______________ is a specific draft that orders the bank to pay a fixed amount of money on demand.

A) Note.
B) Promissory note.
C) Check.
D) Acknowledgment draft.
E) Promissory draft.

Question 72

Which of the following is defined by the UCC as a change, without consent, that modifies the obligation of a party to the instrument?

A) An alteration.
B) A defacement.
C) A material addition.
D) A transformation.
E) A reformation.

Question 73

Which of the following are considered banks under the UCC?

A) Savings and Loans.
B) Credit Unions.
C) Trust Companies.
D) Savings and loans, credit unions, and trust companies.
E) Savings and Loans and Credit Unions, but not Trust Companies.

Question 74

If a customer's ATM card is lost or stolen, the customer must notify the bank within _____ days; and if that is done, the customer is then liable for only the first _____ stolen.

A) 5 Days; $50
B) 3 Days; $100
C) 2 Days; $50
D) 7 Days; $200
E) 10 Days; $500

Question 75

A ______ bank is the first bank that receives the check for payment.

A) Payor.
B) Payee.
C) Depositary.
D) Transfer.
E) Acceptor.

Question 76

Which of the following is false regarding certified checks?

A) If a bank refuses to certify a check, the check is considered dishonored.
B) Once a check is certified, funds of the customer are removed from his or her account and placed in the bank's certified check account.
C) If a bank certifies a check, the drawer of the check is no longer liable for the amount of the check.
D) If a bank certifies a check, the bank has become primarily liable for the check.
E) All of these are false.

Question 77

Which of the following is money stored electronically on microchips, magnetic strips, or other computer media that would allow for the elimination of physical currency?

A) Electronic funds.
B) Electronic medium.
C) Digital cash.
D) Digital resources.
E) Electronic resources.

Question 78

When the depositary bank is the same bank as the payer bank, the check is referred to as a[n] _______________.

A) On-us item.
B) Combined item.
C) Condensed item.
D) Unitary item.
E) Uniform item.

Question 79

Which of the following is the period between the time a check is written and the time it is presented for final payment, during which time a customer can still use his or her funds?

A) Transfer time.
B) Electronic time.
C) Chargeable time.
D) Float time.
E) Usable time.

Question 80

Which of the following is typically a plastic card containing magnetic strips containing data regarding the value of the card?

A) Stored-value cards.
B) Smart cards.
C) Intel cards.
D) Transfer cards.
E) Electronic cards.