Deck 25: A: Transferability and Holder in Due Course

Question 1

A bearer instrument is negotiated by delivery with any necessary indorsements.

Answer 1

False

Question 2

A loss that results from a well-crafted forgery usually falls on the party whose signature was forged.

Answer 2

False

Question 3

A holder takes an instrument for value if he or she accepts the instru?ment as payment for an antecedent debt.

Answer 3

True

Question 4

An HDC takes a negotiable instrument free of most defenses and claims that could be asserted against its transferor.

Question 5

A transfer of a negotiable instrument can give a holder more rights than its prior possessor.

Question 6

A holder takes an instrument for value by performing the promise for which the instrument was issued.

Question 7

An unqualified indorsement does not guarantee payment of an instrument.

Question 8

A blank indorsement does not specify a particular indorsee.

Question 9

A purchaser cannot become an HDC of an instrument so incomplete that an element of negotiability is lacking.

Question 10

If an instrument is acquired as part of a corporate purchase of assets,the holder will have the rights of an HDC.

Question 11

A negotiable instrument cannot be transferred by assignment.

Question 12

A person who does not qualify as an HDC but who derives his or her title through an HDC can acquire the rights and privileges of an HDC.

Question 13

A person who takes a negotiable instrument from a thief may become an HDC.

Question 14

A demand instrument is overdue on the day after its date.

Question 15

A restrictive indorsement prohibits further negotiation of an instrument.

Question 16

An instrument is not defective because it has been dis?honored.

Question 17

Any irregularity on the face of an instrument that creates an ambiguity as to the party to pay will bar HDC status.

Question 18

A payee whose name is misspelled on an instrument cannot indorse the instrument.

Question 19

A bearer instrument can be converted into an order instrument through indorsement.

Question 20

A holder cannot become an HDC unless hr or she has no?tice of any claim to the instrument or defense against it.

Question 21

Tyrone transfers a note by signing it and delivering it to Uri.Tyrone is

A)an indorser.
B)a notary.
C)a note passer.
D)a promisor.

Question 22

Fact Pattern 25-1B
Belle obtains a check payable to her order from Charmayne.Belle signs the back and adds the notation "without recourse."
Refer to Fact Pattern 25-1B.After Belle signs the back and adds the notation "without recourse," she adds "Pay to Desiree." This constitutes

A)a blank qualified indorsement.
B)a special qualified indorsement.
C)a restrictive indorsement.
D)none of the choices.

Question 23

Owen is a holder of a promissory note obtained from Purchase Money,Inc.Regarding the defenses against payment of the note to which Purchase Money is subject,Owen,as an ordinary holder,is subject to

A)more defenses.
B)no defenses.
C)some defenses,but not as many.
D)the same defenses.

Question 24

Fact Pattern 25-1B
Belle obtains a check payable to her order from Charmayne.Belle signs the back and adds the notation "without recourse."
Refer to Fact Pattern 25-1B.After Belle signs the back and adds the notation "without recourse," further negotiation of the check

A)requires Belle's re-indorsement and delivery.
B)requires delivery alone.
C)requires Charmayne's indorsement and delivery.
D)is not possible.

Question 25

Rayette transfers a draft by signing it and delivering it to Suki.Suki is

A)a delivery person.
B)a draftee.
C)an indorsee.
D)a promisee.

Question 26

Todd indorses a check,"Pay to Interstate Trucking if they deliver the lumber by May 1,2012." This is

A)a blank indorsement.
B)a qualified indorsement.
C)a restrictive indorsement.
D)a special indorsement.

Question 27

Finest Office Company employs General Construction,Inc.(GCI),to reno?vate an office and signs a note for $10,000 payable to GCI.GCI breaches the contract,but sells the note for $5,000 to Happy Collection Agency,which knows that GCI has not performed.Happy is an HDC of the note in the amount of

A)$0.
B)$5,000.
C)$10,000.
D)$15,000.

Question 28

Pola wants to transfer a check to Quin.The check is defective if it

A)has been previously dishonored.
B)has no irregularities on its face.
C)is not overdue.
D)is so complete that no element of negotiability is lacking.

Question 29

Lexy obtains a check payable to her order from Maven.To negotiate this order instrument to Nicole requires

A)Lexy's indorsement and delivery.
B)Maven's indorsement and delivery.
C)Nicole's indorsement and delivery.
D)delivery without anyone's indorsement.

Question 30

Fact Pattern 25-1B
Belle obtains a check payable to her order from Charmayne.Belle signs the back and adds the notation "without recourse."
Refer to Fact Pattern 25-1B.Belle's signature and the notation "without recourse" constitute

A)a blank indorsement.
B)a qualified indorsement.
C)a special indorsement.
D)a restrictive indorsement.

Question 31

Vladimir negotiates a bearer instrument to Wendy by

A)assignment.
B)delivery.
C)presenting it in response to a demand by Wendy.
D)promising to pay.

Question 32

Kris transfers a note,on which Liu is the maker,to Mia,who takes it for value and in good faith.Mia knows that Kris breached the contract underlying the note,giving Liu a defense against payment.With respect to this note,Mia is

A)a knowledgeable holder in due course.
B)an ordinary holder.
C)an ordinary holder in due course.
D)an ordinary note taker.

Question 33

Edie is the payee of a bearer instrument-a promissory note in the amount of $1,000.Frank offers to irrigate Edie's ranch next week in ex?change for the note.Edie agrees and delivers the note to Frank.Frank is

A)an HDC,because he promised to perform services at a future date.
B)not an HDC,because he did not take the instrument without notice.
C)not an HDC,because he did not acquire the instrument in good faith.
D)not an HDC,because he did not yet give value for the instrument.

Question 34

Yves negotiates an instrument to Zachary.Negotiation is the transfer of an instrument

A)for valuable consideration under a contract.
B)in a form and by a means that makes the transferee a holder.
C)pursuant to preliminary contract discussions.
D)without the payment of a recognized medium of exchange.

Question 35

Fact Pattern 25-1B
Belle obtains a check payable to her order from Charmayne.Belle signs the back and adds the notation "without recourse."
Refer to Fact Pattern 25-1B.By writing "without recourse" with her signature,Belle

A)avoids the risk of loss from theft of the instrument.
B)relieves herself from liability on the instrument.
C)converts the check into a nonnegotiable instrument.
D)locks the instrument into the bank collection process.

Question 36

Fact Pattern 25-1B
Belle obtains a check payable to her order from Charmayne.Belle signs the back and adds the notation "without recourse."
Refer to Fact Pattern 25-1B.When Belle signs the back and adds the notation "without recourse," the check becomes

A)a bearer instrument.
B)an order instrument.
C)a promissory note.
D)a nonnegotiable instrument.

Question 37

Reel CGI Animé Company issues a promissory note as a demand instrument with a due date of October 5.Syncopated Loan Company accepts the note.Syncopated has notice that the note is overdue if the firm takes the note

A)after October 5.
B)before October 5.
C)on October 5.
D)at any time.

Question 38

Parkdale Roofing Company receives a check from Quik Mart for fixing its roof,and indorses the check to Repair Supplies,Inc.(RSI).Stef,RSI's owner,gives the check to Tiny as a gift.In this situation,the party who is not an HDC of the check but who acquires HDC rights under the shelter principle is

A)no one.
B)Parkdale Roofing.
C)Stef.
D)Tiny.

Question 39

Dru signs a check payable to Excel Services,Inc. ,and gives it to Excel,leaving the amount blank but authorizing Excel to fill it in for $1,000.Excel fills in $1,500 and negotiates the check to Friendly Credit Corporation,an HDC.Friendly Credit can enforce the check for

A)$0.
B)$500.
C)$1,000.
D)$1,500.

Question 40

Demi possesses a check that is "payable to bearer." Esther steals the check and delivers it to Fern.All rights to the check are

A)Demi's.
B)Esther's.
C)Fern's.
D)no one's.

Question 41

DigiTech Corporation pays its employees every two weeks.Eve gets her paycheck,indorses the back ("Eve Anderson"),and,on her lunch hour,goes to cash it at DigiTech's bank,First State Bank.On the street,in a crowd,she loses the check.Greg Smith finds it.Has the check been nego?tiated to Greg? Greg signs the back of the check beneath Eve's signature and cashes it.What might Eve have done to avoid this loss?

Question 42

Joan signs a note that states,"Payable in thirty days." The note is dated March 2.Kent buys the note on April 3.Is Kent an HDC of the note? Explain.