Deck 23: Negotiation and Discharge

Question 1

A special endorsement is one having no words other than the name of the indorser.

Answer 1

False

Question 2

Which of the following best describes cancellation?

A) It is the act that indicates intention to destroy validity of an instrument.
B) It is the act of a third party refuting the rights of the holder of an instrument.
C) It is the act that indicates intention to physically destroy of an instrument.
D) It is the unilateral act of holder giving up rights in the instrument.

Answer 2

A

Question 3

A _____ indorsement designates the particular person to whom payment should be made.

A) depository
B) blank
C) special
D) restrictive

Answer 3

C

Question 4

A depository bank receiving a check with a restrictive indorsement, such as  "for deposit " must always honor the restriction.

Question 5

Negotiable instruments can be made payable to more than one person.

Question 6

The Uniform Commercial Code does not require an allonge to be attached to an instrument.

Question 7

A cancellation made by mistake is not effective.

Question 8

The warranty liability of a qualified indorser is never the same as that of an unqualified indorser.

Question 9

A person who negotiates a bearer instrument by delivery alone, is liable to the immediate transferee as a warrantor of its validity.

Question 10

A qualified indorser warrants that the signatures on the instrument are genuine.

Question 11

The trailing edge is the right side of a check when looking at it from the front.

Question 12

Which of the following is true of the obligation of negotiator of bearer paper?

A) The negotiator is not liable to the immediate transferee as a warrantor of the genuineness of the instrument.
B) One who negotiates a bearer instrument by delivery alone does not guarantee payment.
C) The negotiator must indorse a bearer paper when he negotiates it.
D) The mere delivery by the negotiator of a bearer paper does not change title.

Question 13

Which of the following best describes a restrictive indorsement?

A) It is an indorsement that has the effect of qualifying, thus limiting, the liability of the indorser.
B) It is an indorsement that attempts to prevent the use of the instrument for anything except the stated use.
C) It is an indorsement that designates the particular person to whom payment should be made.
D) It is an indorsement having no words other than the name of the indorser.

Question 14

Which of the following best describes an allonge?

A) It is the right side of a check when looking at it from the front.
B) It is an indorsement consisting of signature of indorser.
C) It is the left side of a check when looking at it from the front.
D) It is a paper attached to an instrument.

Question 15

_____ is a unilateral act of a holder of an instrument, usually without consideration, whereby the holder gives up rights on the instrument.

A) Refutation
B) Cancellation
C) Repudiation
D) Renunciation

Question 16

When a negotiable instrument is lost, this automatically discharges the obligation of the holder.

Question 17

Parties can be discharged from an obligation, if there has been the necessary lapse of time provided by a statute of limitations.

Question 18

A(n) _____ is a signature on the back of an instrument along with any directions or limitations regarding use of or liability for the instrument.

A) authorization
B) renunciation
C) indorsement
D) endorsement

Question 19

Explain liabilities for payment of instrument.

Question 20

James wants to indorse a check to Janice, but wishes to rid himself from all further liabilities. Which of the following types of indorsements is James likely to use in this case?

A) Special indorsement
B) Blank indorsement
C) Restrictive indorsement
D) Qualified indorsement