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Exam 23: Negotiable Instruments: Transfer and Liability

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Question 31

True/False

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A holder takes an instrument for value by performing the promise for which the instrument was issued.

A) True
B) False

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Question 32

Multiple Choice

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Orson signs a check "pay to the order of Painless Dental" drawn on Orson's account in Quantum Bank. To impose liability on Orson if the bank dishonors the check, Painless Dental should present it for payment within

A) one year.
B) six months.
C) ten days.
D) thirty days.

E) All of the above
F) None of the above

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Question 33

Multiple Choice

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Entrepreneur LLC owes Data Analysis Company $2,000. Entrepreneur executes a note to Data Analysis as security for the debt. This security

Good faith includes the observance of reasonable commercial standards of fair dealing.

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she

Anyone who takes a time instrument the day after its expressed due date is on notice that it is overdue.

Jill, in good faith and for value, gets from Kiley a negotiable bearer instrument. Jill does not know that Kiley stole the instrument. Jill is

The holder of an instrument can discharge any party to the instrument by cancellation.

Vera gives Will a $500 check as payment for a debt. Will crudely increases the amount of the check to $5,000 and deposits the check in his First Bank account. Vera is liable for the payment of $5,000 to

A person who transfers an instrument for consideration warrants that all signatures are authentic and authorized.

Doyle gives a check to eMarket Finance to buy 100 shares of stock in FabNu Corporation for Doyle. The price of the shares is constantly fluctuating. eMarket asks Doyle to leave the amount of the check blank and allow it to fill in the price when making the purchase. Doyle agrees. eMarket buys the stock when the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment for a $5,000 debt to Guido & Hollis Accountants (G&H), which takes the check in good faith and without notice of eMarket's act. G&H later learns that eMarket was not authorized to fill in the check for $1,000 over the price. Is G&H an HDC? If so, for how much?

A holder will be deemed to have notice if he or she has reason to know that a defect exists, given all the facts and circumstances known at the time.

Generally, when an indorsement is unauthorized, the burden of loss falls on the first party to take the instrument.

Paula wants to transfer a check to Quinn. The check is defective if it

Sergio makes a gift of a check to Todd who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Todd is

The lack or failure of consideration is a personal defense and can be used to avoid payment to ordinary holders.

Fact Pattern 23-1 Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank. Refer to Fact Pattern 23-1. Niklas is

Presentment warranties protect the person who presents an instrument.

Len signs a note "payable to the order of Account Collection Agency." Unless Len has a valid defense against payment, his liability on this note is

If a maker or drawer believes an imposter to be the named payee on an instrument, the imposter's indorsement is not treated as unauthorized.