Question 1

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Accepted Answer

A) True 
 B)False

Question 2

A(n)  ______ endorsement is the endorser's signature along with a named endorsee.

Accepted Answer

A)   Blank
B)   Allonge
C)   Qualified
D)   Special
E)   SpecificF) A) and C)
G) None of the above

Question 3

An instrument that reads, "Pay to the order of Jones or Green," is payable to _________ payees.

Accepted Answer

A)   Joint
B)   Concurrent
C)   Consecutive
D)   Alternative
E)   AlternateF) A) and C)
G) None of the above

Question 4

Helen worked for ABC Company as the company treasurer. She took 20 of ABC Company's checks, labeled as belonging to ABC Company. Over the course of one year, she signed and mailed the checks to American Express, her own credit card company, to pay her own credit card debt. Assuming the court follows the case in the text, Watson Coatings Inc., v. American Express Travel Services Inc., which of the following is the most likely result in a lawsuit by ABC Company against American Express to recover the amounts of the checks?

Accepted Answer

A)   ABC Company will prevail because American Express, as a payee, does not qualify as a holder in due course.
B)   ABC Company will prevail because American Express should have realized that fraud was involved from the fact that the checks were ABC Company checks.
C)   ABC Company will prevail because fraud was involved.
D)   American Express will prevail and will not be required to return funds.
E)   American Express will have to return ½ of the funds because the parties were equally at fault, American Express for taking the checks, and ABC Company for not more carefully supervising its employee.F) A) and B)
G) B) and D)

Question 5

Which of the following is true regarding the concept of negotiable instruments in Japan?

Accepted Answer

A)   The law governing securities in Japan is technical with little ambiguity or arbitrary application.
B)   The Japanese recognize the legal concept of yuka shoken, which means "valuable securities."
C)   The Japanese have a single legislative act governing both commercial paper and investment securities.
D)   The Japanese Commercial Code recognizes the term negotiable instruments.
E)   Japanese law does not regulate investment securities.F) A) and D)
G) None of the above

Question 6

"House Painting." Susie Smith signed a check agreeing to pay, "Annie Greene, Mary Hodge," $1,000. The payment was for painting her house. A problem with the note was that it spelled Annie's last name, "Greene," whereas Annie spells it simply, "Green." Annie and Mary were having a disagreement regarding how to split up the funds for painting the house. Annie proceeded to sign the check on the back, "Annie Green," and presented it to Bill Brown to satisfy a debt that she owed him. Bill Brown endorsed the check on the back, "Bill Brown, without recourse," and gave it to his nephew, Sam, who took it to the bank for payment. Meanwhile, Susie has stopped payment on the check because following a rain storm, all the paint on the house looked spotted. Mary is unhappy because she did not obtain any of the funds and stated that Annie could not legally endorse the instrument because it misspelled her name and also because she, Mary, did not sign it.
-Which of the following is true regarding Mary's claim that the endorsement by Annie was illegal because the note misspelled Annie's name?

Accepted Answer

A)   Mary is correct.
B)   Mary is correct, but only because Annie signed the note, "Green," instead of "Greene," as such was on the note.
C)   Mary is correct, but only because two payees are listed.
D)   Mary is incorrect.
E)   Mary is incorrect unless she can prove that Susie intentionally and purposefully spelled the name wrong to prevent negotiation.F) A) and D)
G) C) and D)

Question 7

A restrictive endorsement may limit the transferability of the instrument.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is the result if a payee who receives an instrument with missing information completes the missing information in a way that is inconsistent with the intent of issuer, and the instrument has been clearly materially altered?

Accepted Answer

A)   The person taking the instrument cannot become a holder in due course.
B)   The alteration does not prevent a person taking the flawed instrument from becoming a holder in due course.
C)   There is no effect so long as the payee can establish that he or she did not receive any more consideration than that to which the payee was entitled.
D)   The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the holder in due course had knowledge that the payee had done the alteration.
E)   The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the transferee participated in the material alteration.F) None of the above
G) A) and B)

Question 9

"House Painting." Susie Smith signed a check agreeing to pay, "Annie Greene, Mary Hodge," $1,000. The payment was for painting her house. A problem with the note was that it spelled Annie's last name, "Greene," whereas Annie spells it simply, "Green." Annie and Mary were having a disagreement regarding how to split up the funds for painting the house. Annie proceeded to sign the check on the back, "Annie Green," and presented it to Bill Brown to satisfy a debt that she owed him. Bill Brown endorsed the check on the back, "Bill Brown, without recourse," and gave it to his nephew, Sam, who took it to the bank for payment. Meanwhile, Susie has stopped payment on the check because following a rain storm, all the paint on the house looked spotted. Mary is unhappy because she did not obtain any of the funds and stated that Annie could not legally endorse the instrument because it misspelled her name and also because she, Mary, did not sign it.
-Which of the following is true regarding Sam's rights in relation to the check?

Accepted Answer

A)   As a holder, Sam may demand payment from either Susie, Annie, or Mary.
B)   As a holder in due course, Sam may demand payment from either Susie, Annie, or Mary.
C)   As a holder, Sam may demand payment from either Susie or Annie, but not Mary.
D)   As a holder in due course, Sam may demand payment from either Susie or Annie, but not Mary.
E)   Sam may not demand payment from either Susie, Annie, or Mary.F) A) and B)
G) A) and E)

Question 10

Which of the following was the result in Michael J. Kane, Jr. v. Grace Kroll, the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son, but later stopped payment on the check because her son said he could not repay her?

Accepted Answer

A)   The plaintiff was not allowed to recover because the stop payment order prevented the plaintiff from being a holder in due course.
B)   The plaintiff was not allowed to recover because, although he was a holder in due course, the stop payment order negated his entitlement to payment.
C)   The plaintiff was not allowed to recover because the defendant established a lack of consideration to her.
D)   The plaintiff was allowed to recover on a contract theory although he was not a holder in due course.
E)   The plaintiff was allowed to recover because he was a holder in due course.F) B) and E)
G) B) and C)

Question 11

Which of the following is true regarding how a holder may take an instrument for value, but not become a holder in due course?

Accepted Answer

A)   The UCC provides that the only method by which a holder may take an instrument for value but not become a holder in due course is when the holder purchases the instrument at judicial sale or under legal process.
B)   The UCC provides that the only method by which a holder may take an instrument for value, but not become a holder in due course is when the holder acquires an instrument through taking over an estate.
C)   The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following two circumstances: (1)  when the holder purchases the instrument at judicial sale or under legal process, and (2)  when the holder acquires an instrument through taking over an estate.
D)   The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following three circumstances: (1)  when the holder purchases the instrument at judicial sale or under legal process, (2)  when the holder acquires an instrument through taking over an estate, and (3)  when the holder purchases the instrument as part of a bulk transaction not in the regular course of business of the transferor.
E)   The UCC does not recognize circumstances under which a holder may take an instrument for value but not become a holder in due course, although under common law, a person who acquired an instrument through taking over an estate was classified as a holder but not a holder in due course.F) A) and B)
G) B) and C)

Question 12

An instrument is dishonored when a party refuses to pay the instrument such as when a bank refuses to pay because insufficient funds exist.

Accepted Answer

A) True 
 B)False

Question 13

Set forth the five conditions under which a holder may take an instrument for value.

Accepted Answer

A holder may take an instrument for valu...

Question 14

Which of the following is a version of a qualified endorsement?

Accepted Answer

A)   Blank, special, and allonge.
B)   Special and allonge, but not blank.
C)   Special and blank, but not allonge.
D)   Blank and allonge, but not special.
E)   There are no qualified endorsements.F) None of the above
G) All of the above

Question 15

Which of the following does the UCC define as, "honesty in fact and the observance of reasonable commercial standards for fair dealing?"

Accepted Answer

A)   Commercial standards.
B)   Subjective reasonableness.
C)   Objective reasonableness.
D)   Good faith.
E)   Reasonable investigation.F) None of the above
G) A) and D)

Question 16

The statement, "Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

Accepted Answer

A)   Conditional endorsement.
B)   Trust endorsement.
C)   Endorsement to prohibit further endorsement.
D)   Bearer endorsement.
E)   Conditional bearer endorsement.F) A) and E)
G) A) and D)

Question 17

Which of the following may endorse an instrument made payable to a legal entity such as a partnership?

Accepted Answer

A)   The managing partner only.
B)   The financial officer only.
C)   The bookkeeper only.
D)   The treasurer only.
E)   Any authorized representative.F) C) and D)
G) A) and D)

Question 18

Which of the following is a party who is in possession of an instrument that is payable to the party or to the bearer of the instrument?

Accepted Answer

A)   A holder.
B)   A bearer.
C)   A payee.
D)   An issuer.
E)   A transferee.F) None of the above
G) A) and C)

Question 19

Receiving an instrument as a gift satisfies the requirement of taking an instrument for value.

Accepted Answer

A) True 
 B)False

Question 20

According to the UCC, which of the following is true regarding when a person has notice of a fact?

Accepted Answer

A)   Under the UCC a person has notice of a fact only when the person has actual knowledge of the fact.
B)   Under the UCC a person has notice of a fact under the following two circumstances: (1)  when the person has actual knowledge of the fact, and (2)  when the person receives notice or notification of the facts.
C)   Under the UCC a person has notice of a fact under the following three circumstances: (1)  when the person has actual knowledge of the fact, (2)  when the person receives notice or notification of the facts, and (3)  when the person has reason to know the fact exists.
D)   Under the UCC a person has notice of a fact only when the person has signed a verification to the effect that notice was received.
E)   Under the UCC a person has notice of a fact only when the person receives written notification either through regular mail or electronic means.F) D) and E)
G) B) and C)

Exam 27: Negotiation, Holder in Due Course, and Defenses

Correct Answer
verified

Correct Answer
verified

Which of the following is true regarding how a holder may take an instrument for value, but not become a holder in due course?

Correct Answer
verified

Which of the following does the UCC define as, "honesty in fact and the observance of reasonable commercial standards for fair dealing?"

Correct Answer
verified

Set forth the five conditions under which a holder may take an instrument for value.

Correct Answer
verified
A holder may take an instrument for valu...
View Answer

An instrument is dishonored when a party refuses to pay the instrument such as when a bank refuses to pay because insufficient funds exist.

Correct Answer
verified

Correct Answer
verified

Which of the following was the result in Michael J. Kane, Jr. v. Grace Kroll, the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son, but later stopped payment on the check because her son said he could not repay her?

Correct Answer
verified

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Correct Answer
verified

The statement, "Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

Correct Answer
verified

Which of the following is true regarding the concept of negotiable instruments in Japan?

Correct Answer
verified

An instrument that reads, "Pay to the order of Jones or Green," is payable to _________ payees.

Correct Answer
verified

According to the UCC, which of the following is true regarding when a person has notice of a fact?

Correct Answer
verified

Which of the following is a version of a qualified endorsement?

Correct Answer
verified

Which of the following is a party who is in possession of an instrument that is payable to the party or to the bearer of the instrument?

Correct Answer
verified

A(n) ______ endorsement is the endorser's signature along with a named endorsee.

Correct Answer
verified

Which of the following is the result if a payee who receives an instrument with missing information completes the missing information in a way that is inconsistent with the intent of issuer, and the instrument has been clearly materially altered?

Correct Answer
verified

Receiving an instrument as a gift satisfies the requirement of taking an instrument for value.

Correct Answer
verified

A restrictive endorsement may limit the transferability of the instrument.

Correct Answer
verified

Which of the following may endorse an instrument made payable to a legal entity such as a partnership?

Correct Answer
verified

Exam 27: Negotiation, Holder in Due Course, and Defenses

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding how a holder may take an instrument for value, but not become a holder in due course?

Correct AnswerverifiedShow Answer

Which of the following does the UCC define as, "honesty in fact and the observance of reasonable commercial standards for fair dealing?"

Correct AnswerverifiedShow Answer

Set forth the five conditions under which a holder may take an instrument for value.

Correct AnswerverifiedA holder may take an instrument for valu...View AnswerShow Answer

An instrument is dishonored when a party refuses to pay the instrument such as when a bank refuses to pay because insufficient funds exist.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following was the result in Michael J. Kane, Jr. v. Grace Kroll, the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son, but later stopped payment on the check because her son said he could not repay her?

Correct AnswerverifiedShow Answer

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Correct AnswerverifiedShow Answer

The statement, "Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

Correct AnswerverifiedShow Answer

Which of the following is true regarding the concept of negotiable instruments in Japan?

Correct AnswerverifiedShow Answer

An instrument that reads, "Pay to the order of Jones or Green," is payable to _________ payees.

Correct AnswerverifiedShow Answer

According to the UCC, which of the following is true regarding when a person has notice of a fact?

Correct AnswerverifiedShow Answer

Which of the following is a version of a qualified endorsement?

Correct AnswerverifiedShow Answer

Which of the following is a party who is in possession of an instrument that is payable to the party or to the bearer of the instrument?

Correct AnswerverifiedShow Answer

A(n) ______ endorsement is the endorser's signature along with a named endorsee.

Correct AnswerverifiedShow Answer

Which of the following is the result if a payee who receives an instrument with missing information completes the missing information in a way that is inconsistent with the intent of issuer, and the instrument has been clearly materially altered?

Correct AnswerverifiedShow Answer

Receiving an instrument as a gift satisfies the requirement of taking an instrument for value.

Correct AnswerverifiedShow Answer

A restrictive endorsement may limit the transferability of the instrument.

Correct AnswerverifiedShow Answer

Which of the following may endorse an instrument made payable to a legal entity such as a partnership?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A holder may take an instrument for valu...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified