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

[House Painting] Graciela Reyes signed a check agreeing to pay, "Annie Greene, Marney Harris," $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 Marney 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 Hiro Murakami to satisfy a debt that she owed him. Hiro Murakami endorsed the check on the back, "Hiro Murakami, without recourse," and gave it to his nephew, Nate, who took it to the bank for payment. Meanwhile, Graciela has stopped payment on the check because, following a rainstorm, all the paint on the house looked spotted. Marney 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, Marney, did not sign it.
-Which of the following is true regarding the complaint of Marney that she did not also endorse the instrument?

Accepted Answer

A)   She is correct because both names are required in order to provide legal endorsement.
B)   She is correct in that her name was needed for legal endorsement, but that is only the case because of the misspelling of Annie's name.
C)   She is correct because regardless of whether the payees are listed with no designation as to whether they are alternate or joint, or whether the words, "or" or "and" are used to designated payees, any listed payee must endorse a note in order for it to be properly payable.
D)   She is incorrect because Annie properly endorsed the note, and only her signature was needed.
E)   She is incorrect, but only if it can be established that Hiro Murakami lacked knowledge that she had not given her consent to the form of the endorsement.F) None of the above
G) B) and D)

Question 3

Talon has a check that is written out to him from his aunt for a graduation gift. This type of instrument is known as a(n)  ________.

Accepted Answer

A)   order
B)   bearer
C)   transfer
D)   payee
E)   acknowledgementF) B) and D)
G) D) and E)

Question 4

Which of the following is the term for a person creating an endorsement?

Accepted Answer

A)   An allonge
B)   A transferor
C)   A transferee
D)   An endorser
E)   An endorseeF) A) and E)
G) A) and D)

Question 5

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

Accepted Answer

A)   Commercial standards.
B)   Subjective reasonableness.
C)   Objective reasonableness.
D)   Good faith.
E)   Reasonable investigation.F) A) and E)
G) B) and D)

Question 6

In order to be negotiated, ________ must be endorsed as well as delivered.

Accepted Answer

A)   order paper
B)   allonge
C)   bank note
D)   a blank endorsement
E)   qualified endorsementsF) A) and D)
G) B) and E)

Question 7

Kostas is sending his brother-in-law and agent, Ben, who he does not particularly trust, to deposit a check belonging to Kostas into Kostas's business bank account. What is the best way for Kostas to endorse the check to attempt to limit any misappropriation?

Accepted Answer

Kostas should sign the back of the check...

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) A) and B)
G) D) and E)

Question 9

Allison 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 personal credit card debt. Assuming the court follows Watson Coatings Inc., v. American Express Travel Services Inc., the case in the text, 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 half 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) None of the above
G) A) and B)

Question 10

[House Painting] Graciela Reyes signed a check agreeing to pay, "Annie Greene, Marney Harris," $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 Marney 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 Hiro Murakami to satisfy a debt that she owed him. Hiro Murakami endorsed the check on the back, "Hiro Murakami, without recourse," and gave it to his nephew, Nate, who took it to the bank for payment. Meanwhile, Graciela has stopped payment on the check because, following a rainstorm, all the paint on the house looked spotted. Marney 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, Marney, did not sign it.
-Which statement is true regarding the status of Nate?

Accepted Answer

A)   He is not a holder in due course because he did not provide value.
B)   He is not a holder because he did not provide value.
C)   He is not a holder nor is he a holder in due course because he did not provide value.
D)   The fact that a gift was involved does not prevent Nate from being a holder in due course so long as other requirements are satisfied.
E)   The fact that a gift was involved does not prevent Nate from being a holder in due course so long as other requirements are satisfied and Nate is not a minor.F) B) and D)
G) C) and D)

Question 11

Breach of contract is a(n)  ________ defense that an HDC may not be subject to.

Accepted Answer

A)   criminal
B)   civil
C)   personal
D)   alteration
E)   forgeryF) B) and D)
G) A) and E)

Question 12

Once an instrument is negotiable, it remains negotiable.

Accepted Answer

A) True 
 B)False

Question 13

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) C) and E)
G) A) and B)

Question 14

A(n)  ________ is the person receiving an endorsement.

Accepted Answer

A)   Allonge
B)   Transferor
C)   Transferee
D)   Endorser
E)   EndorseeF) A) and D)
G) C) and E)

Question 15

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) B) and E)
G) A) and B)

Question 16

When an instrument is payable to joint payees, the endorsement only needs to be by the first payee.

Accepted Answer

A) True 
 B)False

Question 17

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 fact.
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 fact, 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) None of the above
G) A) and B)

Question 18

One who possesses a cashier's check payable to someone else is not a(n)  ________ even though his name appears on it.

Accepted Answer

A)   holder
B)   holder in due course
C)   bearer
D)   endorser
E)   possessorF) B) and E)
G) A) and D)

Question 19

[House Painting] Graciela Reyes signed a check agreeing to pay, "Annie Greene, Marney Harris," $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 Marney 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 Hiro Murakami to satisfy a debt that she owed him. Hiro Murakami endorsed the check on the back, "Hiro Murakami, without recourse," and gave it to his nephew, Nate, who took it to the bank for payment. Meanwhile, Graciela has stopped payment on the check because, following a rainstorm, all the paint on the house looked spotted. Marney 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, Marney, did not sign it.
-What is the effect of the designation, "Hiro Murakami, without recourse?"

Accepted Answer

A)   It has no effect on any subsequent holder.
B)   It has no effect on anyone, including, but not limited to, any subsequent holder.
C)   It means that Hiro Murakami does not provide any guarantees to subsequent holders if the instrument is later dishonored.
D)   It means that Hiro Murakami is providing that any subsequent holder cannot be held liable.
E)   It means that Hiro Murakami is providing that neither he nor the person who transferred the instrument to him can be held further liable to any subsequent holder.F) C) and E)
G) A) and B)

Question 20

Which of the following was the result in the Case Opener, involving the check taken in good faith by a market, later returned to the market based on a stop payment order, and purchased from the market by the plaintiff who sued Cigna, the issuer of the check?

Accepted Answer

A)   The plaintiff was allowed to recover under the shelter principle and holder-in-due-course status.
B)   The plaintiff was not allowed to recover because he took the check knowing of a problem.
C)   The plaintiff was allowed to recover because the market misrepresented the status of the check.
D)   The plaintiff was not allowed to recover because of the shelter principle and holder-in-due-course status.
E)   The plaintiff was not allowed to recover because the market misrepresented the status of the check.F) A) and B)
G) A) and C)

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

A(n) ________ is the person receiving an endorsement.

Correct Answer
verified

Correct Answer
verified

Which of the following was the result in the Case Opener, involving the check taken in good faith by a market, later returned to the market based on a stop payment order, and purchased from the market by the plaintiff who sued Cigna, the issuer of the check?

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

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

Correct Answer
verified

Kostas is sending his brother-in-law and agent, Ben, who he does not particularly trust, to deposit a check belonging to Kostas into Kostas's business bank account. What is the best way for Kostas to endorse the check to attempt to limit any misappropriation?

Correct Answer
verified
Kostas should sign the back of the check...
View Answer

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

Correct Answer
verified

Once an instrument is negotiable, it remains negotiable.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

One who possesses a cashier's check payable to someone else is not a(n) ________ even though his name appears on it.

Correct Answer
verified

In order to be negotiated, ________ must be endorsed as well as delivered.

Correct Answer
verified

When an instrument is payable to joint payees, the endorsement only needs to be by the first payee.

Correct Answer
verified

Which of the following is the term for a person creating an endorsement?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Breach of contract is a(n) ________ defense that an HDC may not be subject to.

Correct Answer
verified

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

Correct Answer
verified

Talon has a check that is written out to him from his aunt for a graduation gift. This type of instrument is known as a(n) ________.

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

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

A(n) ________ is the person receiving an endorsement.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following was the result in the Case Opener, involving the check taken in good faith by a market, later returned to the market based on a stop payment order, and purchased from the market by the plaintiff who sued Cigna, the issuer of the check?

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

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

Correct AnswerverifiedShow Answer

Kostas is sending his brother-in-law and agent, Ben, who he does not particularly trust, to deposit a check belonging to Kostas into Kostas's business bank account. What is the best way for Kostas to endorse the check to attempt to limit any misappropriation?

Correct AnswerverifiedKostas should sign the back of the check...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Once an instrument is negotiable, it remains negotiable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One who possesses a cashier's check payable to someone else is not a(n) ________ even though his name appears on it.

Correct AnswerverifiedShow Answer

In order to be negotiated, ________ must be endorsed as well as delivered.

Correct AnswerverifiedShow Answer

When an instrument is payable to joint payees, the endorsement only needs to be by the first payee.

Correct AnswerverifiedShow Answer

Which of the following is the term for a person creating an endorsement?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Breach of contract is a(n) ________ defense that an HDC may not be subject to.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Talon has a check that is written out to him from his aunt for a graduation gift. This type of instrument is known as a(n) ________.

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Kostas should sign the back of the check...
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