Question 1

Molly makes a note payable to the order of Patrick; Patrick indorses it to Amy; Amy indorses it to Blake; and Blake indorses it to Homer.Homer presents the note to Molly within a reasonable time,but she refuses to pay.If Homer notifies only Patrick of the dishonor,Amy and Blake are discharged from liability.

Accepted Answer

A) True 
 B)False

Question 2

Zelda signs a promissory note for $2,500 to First Bank.At the request of both Zelda and the bank,Ann also signs the note as an accommodation maker.In this situation:

Accepted Answer

A) Zelda is primarily liable on the note. 
B) Ann is primarily liable on the note. 
C) Ann has secondary liability on the note 
D) Two of the above, (a) and (b), are correct. 
E) Two of the above, (a) and (c), are correct.

Question 3

A(n)___________ signs an instrument to lend his credit to an instrument,and his liability is determined by the capacity in which he signs.

Accepted Answer

A) indorser 
B) accommodation party 
C) authorized agent 
D) maker

Question 4

Primary liability does not apply to issuers of cashier's checks.

Accepted Answer

A) True 
 B)False

Question 5

Warranties on presentment are the same regardless of who is the payor or acceptor.

Accepted Answer

A) True 
 B)False

Question 6

Unauthorized signatures include both forgeries and signatures made by an agent without authority.

Accepted Answer

A) True 
 B)False

Question 7

Transferor's warranties and presenter's warranties are implied warranties imposed only on those who sign an instrument.

Accepted Answer

A) True 
 B)False

Question 8

By paying the holder on an instrument,a party may be discharged from liability.

Accepted Answer

A) True 
 B)False

Question 9

An unauthorized signature cannot be ratified by the person whose name appears on the instrument.

Accepted Answer

A) True 
 B)False

Question 10

Zoron Company purchased a truck from Ace Motors.The sales personnel at Ace know that Anton Green is an executive at Zoron.To pay for the truck,Anton delivered a $26,000 note to Ace and signed it "Anton Green,Agent." In this case:

Accepted Answer

A) the signature of the maker is incomplete. Neither Zoron nor Anton is liable on the note. 
B) since "Zoron Company" does not appear on the note, only Anton is liable to Ace for payment of the note. 
C) as long as Ace Motors remains holder of the note, Zoron Company is liable for payment. 
D) if ABC bank becomes a holder in due course of the note and Zoron Company does not pay, the bank has no recourse against Anton.

Question 11

Discuss the effect of an unauthorized signature on an instrument.

Accepted Answer

The answer of Discuss the effect of an unauthorized signature...

Question 12

An accommodation maker is not liable on a note since he only agreed to sign as a favor to the maker.

Accepted Answer

A) True 
 B)False

Question 13

Notice of dishonor of an instrument must be given:

Accepted Answer

A) by a bank before midnight of the third banking day following the banking day on which it receives notice of dishonor. 
B) by a bank before midnight on the next banking day following the banking day on which it receives notice of dishonor. 
C) by a nonbank, with respect to an instrument taken for collection, within three business days following the day on which it received notice. 
D) in all situations within seven calendar days following the day on which dishonor occurred.

Question 14

An obligation to pay a negotiable instrument subject to conditions precedent is known as:

Accepted Answer

A) primary liability. 
B) secondary liability. 
C) acceptance. 
D) dishonor.

Question 15

Under Revised Article 3 of the UCC,failure to give notice of dishonor will discharge the drawer from having to pay on the instrument.

Accepted Answer

A) True 
 B)False

Question 16

If a holder presents a note for payment to the maker,which of the following warranties is/are given?

Accepted Answer

A) All indorsements are genuine. 
B) All signatures are genuine. 
C) The holder has no knowledge that any indorsements are forged. 
D) The holder is entitled to enforce the note or is authorized to obtain payment on behalf of the person entitled to enforce the note. 
E) All of the above.

Question 17

Discharge applies to the individual,not to the instrument,and a person's liability may be discharged with regard to one party but not to another.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is true of warranty liability as it affects negotiable instruments?

Accepted Answer

A) Warranty liability applies to any persons who transfer an instrument and receive consideration. 
B) A drawee of an unaccepted draft who pays in good faith receives a presentment warranty from the person obtaining payment and from all prior transferors of the draft. 
C) A drawee who accepts an instrument in good faith receives a presentment warranty from the person obtaining acceptance that the draft has not been altered. 
D) All of the above. 
E) None of the above.

Question 19

The drawer is obligated to pay the draft only if the drawee fails to pay the instrument.

Accepted Answer

A) True 
 B)False

Question 20

Parties that are usually secondarily liable for an instrument are:
a.indorsers and drawers.
b.makers and indorsers.
c.makers and acceptors.
d.acceptors and drawers.

Accepted Answer

The answer of Parties that are usually secondarily liable for...

Exam 26: Liability of Parties

Zelda signs a promissory note for $2,500 to First Bank.At the request of both Zelda and the bank,Ann also signs the note as an accommodation maker.In this situation:

A(n) ___________ signs an instrument to lend his credit to an instrument,and his liability is determined by the capacity in which he signs.

Primary liability does not apply to issuers of cashier's checks.

Warranties on presentment are the same regardless of who is the payor or acceptor.

Unauthorized signatures include both forgeries and signatures made by an agent without authority.

Transferor's warranties and presenter's warranties are implied warranties imposed only on those who sign an instrument.

By paying the holder on an instrument,a party may be discharged from liability.

An unauthorized signature cannot be ratified by the person whose name appears on the instrument.

Zoron Company purchased a truck from Ace Motors.The sales personnel at Ace know that Anton Green is an executive at Zoron.To pay for the truck,Anton delivered a $26,000 note to Ace and signed it "Anton Green,Agent." In this case:

Discuss the effect of an unauthorized signature on an instrument.

An accommodation maker is not liable on a note since he only agreed to sign as a favor to the maker.

Notice of dishonor of an instrument must be given:

An obligation to pay a negotiable instrument subject to conditions precedent is known as:

Under Revised Article 3 of the UCC,failure to give notice of dishonor will discharge the drawer from having to pay on the instrument.

If a holder presents a note for payment to the maker,which of the following warranties is/are given?

Discharge applies to the individual,not to the instrument,and a person's liability may be discharged with regard to one party but not to another.

Which of the following is true of warranty liability as it affects negotiable instruments?

The drawer is obligated to pay the draft only if the drawee fails to pay the instrument.

Parties that are usually secondarily liable for an instrument are: a.indorsers and drawers. b.makers and indorsers. c.makers and acceptors. d.acceptors and drawers.