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Exam 26: Transferability and Holder in Due Course

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Question 1

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Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is​

A) ​an HDC, because he promised to perform services at a future date.
B) ​an HDC, because the transferor was the original payee on the note.
C) ​not an HDC, because he did not acquire the instrument in good faith.
D) ​not an HDC, because he did not yet give value for the instrument.

E) A) and B)
F) B) and C)

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Question 2

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An instrument can only be transferred by negotiation.

A) True
B) False

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Question 3

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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?

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is​

An instrument payable to two or more persons in the alternative requires the indorsement of both payees for negotiation.

A holder takes an instrument for value if he or she inherits an instrument.

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​

Fact Pattern 26-1 Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature. -Refer to Fact Pattern 26-A1. When Patricia writes "Pay to Patricia" above Nina's signature, the check becomes​

Secure Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Secure Loan takes it​

An instrument is defective if it is overdue.

Fact Pattern 26-1 Nina obtains a check payable to her order from Oran. Nina signs the back and gives the check to Patricia. Patricia writes "Pay to Patricia" above Nina's signature. -Refer to Fact Pattern 26-1. After Patricia writes "Pay to Patricia" above Nina's signature, further negotiation of the check​

Under the UCC, a transfer of rights under a contract is a negotiation.

Entrepreneur LLC owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security​

An instrument is defective if it has been previously dishonored.

Often, whether a holder will be able to obtain payment on an instrument will depend on whether he or she is a holder in due course.

A transfer by assignment can make it possible for a transferee to receive more rights in the instrument than the prior possessor had.

Rod negotiates a bearer instrument to Shauna by​

Usually, indorsements are qualified indorsements.

Raul wants to transfer a check to Schmidt. The check is defective if it​

Avril receives a payroll check from Business Solutions, Inc., and indorses it by signing her name on the back of the check. This is​