Question 1

A person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on it.

Accepted Answer

A) True 
 B)False

Question 2

A holder in due course takes negotiable instrument free form personal defenses but not real defenses.

Accepted Answer

A) True 
 B)False

Question 3

A drawer or maker is generally liable for payment on a forged indorsement of a fictitious payee.

Accepted Answer

A) True 
 B)False

Question 4

There are two (2)types of implied warranties: transfer warranties and accommodation warranties.

Accepted Answer

A) True 
 B)False

Question 5

Under the Uniform Commercial Code,value has been given if the holder gives an irrevocable obligation as payment.

Accepted Answer

A) True 
 B)False

Question 6

Cancellation of a negotiable instrument may be accomplished by the holder's destruction or mutilation of the instrument with the intent of eliminating the obligation.

Accepted Answer

A) True 
 B)False

Question 7

Under the Uniform Commercial Code,value has been given if the holder performs the agreed-upon promise.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following parties are liable only after a negotiable instrument has been presented and dishonored,and proper notice has been given?

Accepted Answer

A)  drawer, maker, acceptor and qualified indorser 
B)  maker, acceptor and unqualified indorser 
C)  acceptor and qualified indorser 
D)  drawer and unqualified indorser 
E)  maker and unqualified indorser

Question 9

Assume Susie borrows $500 for school tuition from Sneaky Slim and gives him a note for that amount payable with interest in the amount of $25 due in one year.Slim cleverly alters the note to say $5,000 with interest of $500 due in one year.Slim then negotiates the note to Alice who negotiates it to Bob.A year later,Bob asks Susie for payment of $5,500.Who is liable to whom for payment,and for how much?

Accepted Answer

The answer of Assume Susie borrows $500 for school tuition...

Question 10

John writes a check,making it payable to Jane Smith.Before Jane indorses the check,Ralph steals it,forges Jane's indorsement,and cashes it at the local grocery store.John's bank charges this check against John's account.John learns of the forgery and complains.Who is ultimately liable for this loss,assuming Ralph cannot be found?

Accepted Answer

A)  John 
B)  Jane 
C)  Ralph 
D)  John's bank 
E)  The grocery store

Question 11

Can transfer warranties be disclaimed?

Accepted Answer

A)  no, they cannot be disclaimed for any negotiable instruments 
B)  yes, they can be disclaimed for any negotiable instruments 
C)  yes, they can be disclaimed, but only by holders in due course 
D)  yes, they can be disclaimed, but only for bearer instruments 
E)  yes, they can be disclaimed, but only for instruments other than checks

Question 12

Warranty liability is not dependent on one's signature.

Accepted Answer

A) True 
 B)False

Question 13

________ warranties cannot be disclaimed with respect to checks,but they can be disclaimed with respect to other instruments.

Accepted Answer

A)  Express 
B)  Implied 
C)  Full 
D)  Limited 
E)  Transfer

Question 14

A holder is any person in possession of a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 15

Jon is a holder in due course of a negotiable instrument and gives the instrument to Sarah as a Valentine's Day gift.

Accepted Answer

A)  Sarah is a holder in due course. 
B)  Sarah is not a holder in due course but has the rights of a holder in due course. 
C)  Personal defenses would be successful against Sarah. 
D)  Sarah has become the payee of the instrument. 
E)  Anyone Sarah transfers the instrument to becomes a holder in due course.

Question 16

Payees generally do not meet the requirements for being a holder in due course,because they know about any claims or defenses against the instrument.

Accepted Answer

A) True 
 B)False

Question 17

With respect to negotiable instruments,the "red light doctrine" prevents a holder from being a holder in due course if the holder has knowledge of a defense to the payment of the instrument.

Accepted Answer

A) True 
 B)False

Question 18

A holder who takes an instrument with notice of its dishonor cannot qualify as a holder in due course.

Accepted Answer

A) True 
 B)False

Question 19

In terms of the requirements for becoming a holder in due course,"good faith" means honesty in fact in the conduct or transaction concerned.

Accepted Answer

A) True 
 B)False

Question 20

Signature liability on a negotiable instrument is also known as:

Accepted Answer

A)  contract liability. 
B)  agent liability. 
C)  warranty liability. 
D)  secondary liability. 
E)  shelter liability.

Exam 21: Holder in Due Course and Liability of Parties

A person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on it.

A holder in due course takes negotiable instrument free form personal defenses but not real defenses.

A drawer or maker is generally liable for payment on a forged indorsement of a fictitious payee.

There are two (2)types of implied warranties: transfer warranties and accommodation warranties.

Under the Uniform Commercial Code,value has been given if the holder gives an irrevocable obligation as payment.

Cancellation of a negotiable instrument may be accomplished by the holder's destruction or mutilation of the instrument with the intent of eliminating the obligation.

Under the Uniform Commercial Code,value has been given if the holder performs the agreed-upon promise.

Which of the following parties are liable only after a negotiable instrument has been presented and dishonored,and proper notice has been given?

Can transfer warranties be disclaimed?

Warranty liability is not dependent on one's signature.

________ warranties cannot be disclaimed with respect to checks,but they can be disclaimed with respect to other instruments.

A holder is any person in possession of a negotiable instrument.

Jon is a holder in due course of a negotiable instrument and gives the instrument to Sarah as a Valentine's Day gift.

Payees generally do not meet the requirements for being a holder in due course,because they know about any claims or defenses against the instrument.

With respect to negotiable instruments,the "red light doctrine" prevents a holder from being a holder in due course if the holder has knowledge of a defense to the payment of the instrument.

A holder who takes an instrument with notice of its dishonor cannot qualify as a holder in due course.

In terms of the requirements for becoming a holder in due course,"good faith" means honesty in fact in the conduct or transaction concerned.

Signature liability on a negotiable instrument is also known as: