Question 1

The shelter rule applies even if the transferee was a party to fraud or illegality affecting the instrument.

Accepted Answer

A) True 
 B)False

Question 2

Tony is fraudulently induced to issue a check to Rita.Tony has:

Accepted Answer

A)   a claim to ownership of the check.
B)   a defense to Rita's demand for payment.
C)   neither a claim nor a defense.
D)   both a claim and a defense.E) A) and C)
F) C) and D)

Question 3

The principal advantage of negotiable instruments is the safety.

Accepted Answer

A) True 
 B)False

Question 4

Negotiability is destroyed by a qualified indorsement.

Accepted Answer

A) True 
 B)False

Question 5

Defenses that may be asserted against a holder in due course are called:

Accepted Answer

A)   personal defenses.
B)   real defenses.
C)   special defenses.
D)   holder in due course defenses.E) A) and B)
F) All of the above

Question 6

Abby needs some quick cash,so she hits upon a scheme.She tells Frank that she is collecting for foreign refugees,so Frank makes out a check for $100 payable to the order of Abby.Abby indorses it and delivers it to Joanne for $90 cash.Joanne gives it to Margaret as a present.Frank discovers Abby's deception and refuses to pay Margaret.Will he win?

Accepted Answer

A)   No,because Margaret is a holder in due course
B)   No,because of the shelter rule
C)   Yes,since Margaret did not take the check for value
D)   Yes,since the check was not negotiated to MargaretE) B) and C)
F) A) and B)

Question 7

A holder in due course has the same rights under a consumer credit contract as under the UCC as long as a special notice requirement has been met.

Accepted Answer

A) True 
 B)False

Question 8

Revised Article 3 adopts a definition of good faith that has both a subjective and an objective component.

Accepted Answer

A) True 
 B)False

Question 9

What is the effect of an alteration on a negotiable instrument? Does it make a difference whether the alteration was made fraudulently?

Accepted Answer

An alteration is an unauthorized change ...

Question 10

A bank "gives value" when it allows a depositor to withdraw funds against a deposited item.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is required regarding indorsements?

Accepted Answer

A)   An indorsement must be written on the back side of the instrument.
B)   There must be compliance with Federal Reserve Board guidelines in order for the instrument to be negotiable.
C)   An indorsement must be written on the instrument or on a paper affixed to the instrument.
D)   An indorsement must be dated.E) All of the above
F) A) and B)

Question 12

Scott buys a television from Kacey's Electronics,giving Kacey a check for $550.Kacey uses a special indorsement and negotiates the check to Rory.Rory carefully changes the amount to read $1550 and loses the check on the way to the bank.Harry picks it up and tries to cash it.What will he get?

Accepted Answer

A)   Scott will have to pay him $550.
B)   Kacey will have to pay him $550.
C)   Rory will have to pay him $1550.
D)   No one will have to pay Harry.E) B) and D)
F) B) and C)

Question 13

A person is never entitled to enforce an instrument if that person is not the owner of the instrument or if that person is in wrongful possession of the instrument.

Accepted Answer

A) True 
 B)False  False

Question 14

Which one of the following is not a personal defense?

Accepted Answer

A)   Infancy,to the extent that it is a defense to a simple contract
B)   Breach of contract
C)   Non-delivery of an instrument
D)   Failure of considerationE) B) and C)
F) A) and B)

Question 15

Real defenses include all but which of the following?

Accepted Answer

A)   Forgery of instrument
B)   Minority of maker
C)   Material alteration
D)   Theft of bearer paperE) None of the above
F) A) and D)

Question 16

Cynthia Todd is the holder of a check with the indorsement "Judd Solomon." To protect herself,Cynthia may:

Accepted Answer

A)   convert the special indorsement to a blank indorsement.
B)   convert the special indorsement to a qualified indorsement.
C)   write above Judd's signature,"Pay Cynthia Todd."
D)   not convert the indorsements,but could only protect her interest in the check by depositing it in her account as soon as possible.E) A) and B)
F) None of the above

Question 17

A(n) ____ indorsement is an indorsement made by a person that is not the holder of the instrument.The effect of this indorsement is to make the signer liable on the instrument as an indorser.

Accepted Answer

A)   anomalous
B)   blank
C)   unqualified
D)   specialE) B) and C)
F) A) and C)

Question 18

Revised Article 3 provides that the impostor rule does not include an impostor who impersonates an agent of a principal and who induces someone to create a negotiable instrument payable to the principal.

Accepted Answer

A) True 
 B)False  False

Question 19

A person who takes a check stamped "NSF" may still be a holder in due course.

Accepted Answer

A) True 
 B)False  False

Question 20

If Aubree indorses a check "without recourse":

Accepted Answer

A)   Aubree is not contractually liable if the check is not paid.
B)   negotiability is destroyed.
C)   the check cannot be transferred.
D)   Aubree cannot transfer good title to the check.E) A) and D)
F) A) and B)

Exam 27: Transfer and Holder in Due Course

The shelter rule applies even if the transferee was a party to fraud or illegality affecting the instrument.

Correct Answer
verified

Tony is fraudulently induced to issue a check to Rita.Tony has:

Correct Answer
verified

The principal advantage of negotiable instruments is the safety.

Correct Answer
verified

Negotiability is destroyed by a qualified indorsement.

Correct Answer
verified

Defenses that may be asserted against a holder in due course are called:

Correct Answer
verified

Correct Answer
verified

A holder in due course has the same rights under a consumer credit contract as under the UCC as long as a special notice requirement has been met.

Correct Answer
verified

Revised Article 3 adopts a definition of good faith that has both a subjective and an objective component.

Correct Answer
verified

What is the effect of an alteration on a negotiable instrument? Does it make a difference whether the alteration was made fraudulently?

Correct Answer
verified
An alteration is an unauthorized change ...
View Answer

A bank "gives value" when it allows a depositor to withdraw funds against a deposited item.

Correct Answer
verified

Which of the following is required regarding indorsements?

Correct Answer
verified

Scott buys a television from Kacey's Electronics,giving Kacey a check for $550.Kacey uses a special indorsement and negotiates the check to Rory.Rory carefully changes the amount to read $1550 and loses the check on the way to the bank.Harry picks it up and tries to cash it.What will he get?

Correct Answer
verified

A person is never entitled to enforce an instrument if that person is not the owner of the instrument or if that person is in wrongful possession of the instrument.

Correct Answer
verified
False

Which one of the following is not a personal defense?

Correct Answer
verified

Real defenses include all but which of the following?

Correct Answer
verified

Cynthia Todd is the holder of a check with the indorsement "Judd Solomon." To protect herself,Cynthia may:

Correct Answer
verified

A(n) ____ indorsement is an indorsement made by a person that is not the holder of the instrument.The effect of this indorsement is to make the signer liable on the instrument as an indorser.

Correct Answer
verified

Revised Article 3 provides that the impostor rule does not include an impostor who impersonates an agent of a principal and who induces someone to create a negotiable instrument payable to the principal.

Correct Answer
verified
False

A person who takes a check stamped "NSF" may still be a holder in due course.

Correct Answer
verified
False

If Aubree indorses a check "without recourse":

Correct Answer
verified

Exam 27: Transfer and Holder in Due Course

The shelter rule applies even if the transferee was a party to fraud or illegality affecting the instrument.

Correct AnswerverifiedShow Answer

Tony is fraudulently induced to issue a check to Rita.Tony has:

Correct AnswerverifiedShow Answer

The principal advantage of negotiable instruments is the safety.

Correct AnswerverifiedShow Answer

Negotiability is destroyed by a qualified indorsement.

Correct AnswerverifiedShow Answer

Defenses that may be asserted against a holder in due course are called:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A holder in due course has the same rights under a consumer credit contract as under the UCC as long as a special notice requirement has been met.

Correct AnswerverifiedShow Answer

Revised Article 3 adopts a definition of good faith that has both a subjective and an objective component.

Correct AnswerverifiedShow Answer

What is the effect of an alteration on a negotiable instrument? Does it make a difference whether the alteration was made fraudulently?

Correct AnswerverifiedAn alteration is an unauthorized change ...View AnswerShow Answer

A bank "gives value" when it allows a depositor to withdraw funds against a deposited item.

Correct AnswerverifiedShow Answer

Which of the following is required regarding indorsements?

Correct AnswerverifiedShow Answer

Scott buys a television from Kacey's Electronics,giving Kacey a check for $550.Kacey uses a special indorsement and negotiates the check to Rory.Rory carefully changes the amount to read $1550 and loses the check on the way to the bank.Harry picks it up and tries to cash it.What will he get?

Correct AnswerverifiedShow Answer

A person is never entitled to enforce an instrument if that person is not the owner of the instrument or if that person is in wrongful possession of the instrument.

Correct AnswerverifiedFalse

Which one of the following is not a personal defense?

Correct AnswerverifiedShow Answer

Real defenses include all but which of the following?

Correct AnswerverifiedShow Answer

Cynthia Todd is the holder of a check with the indorsement "Judd Solomon." To protect herself,Cynthia may:

Correct AnswerverifiedShow Answer

A(n) ____ indorsement is an indorsement made by a person that is not the holder of the instrument.The effect of this indorsement is to make the signer liable on the instrument as an indorser.

Correct AnswerverifiedShow Answer

Revised Article 3 provides that the impostor rule does not include an impostor who impersonates an agent of a principal and who induces someone to create a negotiable instrument payable to the principal.

Correct AnswerverifiedFalse

A person who takes a check stamped "NSF" may still be a holder in due course.

Correct AnswerverifiedFalse

If Aubree indorses a check "without recourse":

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An alteration is an unauthorized change ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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False

Correct Answer
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False

Correct Answer
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