Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is​

Accepted Answer

A)  ​an HDC, because he promised to perform services at a future date. 
B)  ​an HDC, because the transferor was the original payee on the note. 
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 3

There are some limitations on the shelter principle.

Accepted Answer

A) True 
 B)False

Question 4

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

Accepted Answer

A) True 
 B)False

Question 5

Dan signs a check payable to Ed, who indorses the back, gives it to Foodway Market, and receives cash. The transfer of the check from Dan to Ed is​

Accepted Answer

A)  ​an assignment. 
B)  ​a negotiation. 
C)  ​none of the choices. 
D)  ​a sale.

Question 6

An instrument can only be transferred by negotiation.

Accepted Answer

A) True 
 B)False

Question 7

Entrepreneur LLC owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security​

Accepted Answer

A)  ​does not constitute sufficient consideration for HDC status. 
B)  ​does not satisfy the value requirement for HDC status. 
C)  ​satisfies the consideration requirement for HDC status. 
D)  ​satisfies the value requirement for HDC status.

Question 8

Emily writes and signs a check payable to "Five Star Cinema." George, Five Star's manager, indorses the check "For deposit only." This is​

Accepted Answer

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

Question 9

Estes receives a check from Fleet Trucking Corporation. On the back of the check, Estes writes "pay to Garden Valley Bank only" and signs his name. This is​

Accepted Answer

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

Question 10

An indorsement is a signature, with or without additional words or statements.

Accepted Answer

A) True 
 B)False

Question 11

A holder takes an instrument for value if he or she accepts the instrument in payment of a preexisting obligation.

Accepted Answer

A) True 
 B)False

Question 12

The effect of a conditional indorsement on the back of an instrument differs from the effect of conditional language that appears on its face.

Accepted Answer

A) True 
 B)False

Question 13

A holder takes an instrument for value by promising to perform in the future.

Accepted Answer

A) True 
 B)False

Question 14

Fact Pattern 16-1
Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature.
-Refer to Fact Pattern 16-1.By writing "Pay to Patricia" above Nina's signature, Patricia​

Accepted Answer

A)  ​avoids the risk of loss from theft of the instrument. 
B)  ​relieves himself from liability on the instrument. 
C)  ​converts a legitimate negotiable instrument into a stolen instrument. 
D)  ​locks the instrument into the bank collection process.

Question 15

A person who in good faith acquires a negotiable instrument from a thief cannot become an HDC under any circumstances.

Accepted Answer

A) True 
 B)False

Question 16

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

Accepted Answer

A) True 
 B)False

Question 17

A person who receives an instrument as a gift automatically possesses the rights of a holder in due course.

Accepted Answer

A) True 
 B)False

Question 18

Talia, who is not a Urban Bank customer, attempts to cash a check drawn on the bank. The check is considered dishonored if Urban Bank​

Accepted Answer

A)  ​refuses to pay it. 
B)  ​charges a fee to cash it. 
C)  ​asks Talia for reasonable identification. 
D)  ​asks Talia to sign a receipt for the payment on the check.

Question 19

For a check, a "reasonable time" is ninety days after the date of the check.

Accepted Answer

A) True 
 B)False

Question 20

A special indorsement does not specify a particular indorsee.

Accepted Answer

A) True 
 B)False

Exam 16: Transferability and Holder in Due Course

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

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is​

There are some limitations on the shelter principle.

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

Dan signs a check payable to Ed, who indorses the back, gives it to Foodway Market, and receives cash. The transfer of the check from Dan to Ed is​

An instrument can only be transferred by negotiation.

Entrepreneur LLC owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security​

Emily writes and signs a check payable to "Five Star Cinema." George, Five Star's manager, indorses the check "For deposit only." This is​

Estes receives a check from Fleet Trucking Corporation. On the back of the check, Estes writes "pay to Garden Valley Bank only" and signs his name. This is​

An indorsement is a signature, with or without additional words or statements.

A holder takes an instrument for value if he or she accepts the instrument in payment of a preexisting obligation.

The effect of a conditional indorsement on the back of an instrument differs from the effect of conditional language that appears on its face.

A holder takes an instrument for value by promising to perform in the future.

Fact Pattern 16-1 Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature. -Refer to Fact Pattern 16-1.By writing "Pay to Patricia" above Nina's signature, Patricia​

A person who in good faith acquires a negotiable instrument from a thief cannot become an HDC under any circumstances.

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

A person who receives an instrument as a gift automatically possesses the rights of a holder in due course.

Talia, who is not a Urban Bank customer, attempts to cash a check drawn on the bank. The check is considered dishonored if Urban Bank​

For a check, a "reasonable time" is ninety days after the date of the check.

A special indorsement does not specify a particular indorsee.

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

Dan signs a check payable to Ed, who indorses the back, gives it to Foodway Market, and receives cash. The transfer of the check from Dan to Ed is

Entrepreneur LLC owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security

Emily writes and signs a check payable to "Five Star Cinema." George, Five Star's manager, indorses the check "For deposit only." This is

Estes receives a check from Fleet Trucking Corporation. On the back of the check, Estes writes "pay to Garden Valley Bank only" and signs his name. This is

Fact Pattern 16-1 Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature. -Refer to Fact Pattern 16-1.By writing "Pay to Patricia" above Nina's signature, Patricia

Talia, who is not a Urban Bank customer, attempts to cash a check drawn on the bank. The check is considered dishonored if Urban Bank