Question 1

Any person who can trace his title to an instrument back to a holder in due course receives rights similar to a holder in due course even if he cannot meet the requirements himself.This is known as the _______.

Accepted Answer

A)  shelter rule
B)  blue law
C)  FTC rule
D)  irregular paper lawE) A) and B)
F) B) and D)

Question 2

If an order instrument is transferred without indorsement:

Accepted Answer

A)  the instrument has not been negotiated.
B)  the transferee can qualify as a holder.
C)  the transferee has the right to the qualified indorsement of the transferor.
D)  the transferee has none of the rights of the transferor to enforce the instrument.E) All of the above
F) B) and D)

Question 3

By indorsing an instrument,a person incurs an obligation to pay it if the person primarily liable on it fails to pay it.

Accepted Answer

A) True 
 B)False

Question 4

In case of an indorsement for collection,any person other than a bank who purchases the check is considered to have converted the check unless the indorser received the amount paid for it.

Accepted Answer

A) True 
 B)False

Question 5

Indorsing an instrument,"Pay to Sara Garcia," limits payment to Sara Garcia and further negotiation becomes void.

Accepted Answer

A) True 
 B)False

Question 6

With instruments payable at a definite time,Revised Article 3 requires that if:

Accepted Answer

A)  the principal is not payable in installments and the due date has not been accelerated,the instrument is overdue on the day after the due date.
B)  the principal is due in installments and a due date has not been accelerated,the instrument is overdue on the day after the due date.
C)  a due date for the principal has been accelerated,the instrument is overdue upon default.
D)  there is a default in payment of the interest but no default in the payment of principal,the instrument becomes overdue.E) A) and B)
F) All of the above

Question 7

Claims and defenses to payment of an instrument that go to the validity of an instrument are known as real defenses.

Accepted Answer

A) True 
 B)False

Question 8

If an instrument is made payable to cash,it is called bearer paper.

Accepted Answer

A) True 
 B)False

Question 9

A holder in due course takes a negotiable instrument free of all:

Accepted Answer

A)  negotiable defenses.
B)  real defenses.
C)  claims to the instrument.
D)  claims to the bearer.E) B) and C)
F) B) and D)

Question 10

In order to become a holder in due course,a person who takes a negotiable instrument must be a holder,and take the instrument:

Accepted Answer

A)  without notice that the instrument contains an authorized signature.
B)  with notice that it is overdue or has been dishonoured.
C)  with notice of any claim of a property or possessory interest in it.
D)  without notice that any party has any defense against it or claim in recoupment to it.E) None of the above
F) A) and D)

Question 11

Terry has a check indorsed "Pay to the order of Terry." Terry gives the check to Jane without indorsing it.Is Jane a holder?

Accepted Answer

A)  No,because Jane failed to indorse the check.
B)  No,because Terry failed to indorse the check.
C)  Yes,because only delivery was necessary to negotiate the check.
D)  Yes,because Jane may supply the missing indorsement herself.E) A) and B)
F) A) and C)

Question 12

A "claim in recoupment":

Accepted Answer

A)  is a claim of the original payee against the obligor of the instrument.
B)  must arise from the transaction that gave rise to the instrument.
C)  is actually a defense to an instrument,but not an offset to liability.
D)  can make a person a holder in due course even if he knows about it before the negotiation.E) A) and B)
F) A) and C)

Question 13

To negotiate an instrument:

Accepted Answer

A)  it must not be transferred involuntarily.
B)  it must be transferred voluntarily.
C)  it must be transferred by a person other than the issuer.
D)  it must be transferred by the issuer.E) A) and B)
F) A) and C)

Question 14

An order paper can be negotiated by the bearer by transfer alone.

Accepted Answer

A) True 
 B)False

Question 15

A qualified indorsement:

Accepted Answer

A)  changes the negotiable nature of the instrument.
B)  can only be used with a blank indorsement.
C)  can only be used with a special indorsement.
D)  eliminates the contractual liability of the indorser.E) A) and B)
F) A) and C)

Question 16

The transfer of possession (whether voluntary or involuntary) of a negotiable instrument by a person (other than the issuer) to another person who becomes its holder is known as __.

Accepted Answer

A)  recoupment
B)  negotiation
C)  indorsement
D)  ratificationE) A) and D)
F) A) and C)

Question 17

Which of the following statements is true for a restrictive indorsement?

Accepted Answer

A)  A person who purchases a check indorsed "for collection",automatically converts it even if the indorser received the amount paid for it.
B)  If an indorser merely signs his name and does not specify to whom the instrument is payable,he has indorsed the instrument in restriction.
C)  The person who takes an instrument with a restrictive indorsement need not pay for the instrument consistently with the indorsement.
D)  Indorsements for collection or deposit are restrictive indorsements.E) B) and D)
F) A) and D)

Question 18

Monica contracted with Joe's Furnishing's to complete the work on her house by 1st November.She gave Joe's a negotiable promissory note in the amount of $20,000,payable to the order of Joe's on November 1.Joe's then negotiated the note to the bank.He however,could not complete the work by 1st of November.If the bank is able to qualify as a holder in due course,which of the following statements is true?

Accepted Answer

A)  Monica is not liable to the bank because Joe's breached the contract,not her.
B)  The bank can collect the amount from Joe's because he negotiated the note to the bank.
C)  Monica can assert personal defense against the bank and avoid payment as Joe's did not complete the work on time.
D)  Monica cannot assert personal defense against the bank and avoid payment as it was a negotiation,and not a simple contract.E) B) and C)
F) B) and D)

Question 19

A forged indorsement will not prevent a person from becoming a holder in due course.

Accepted Answer

A) True 
 B)False

Question 20

Explain the nature and meaning of an indorsement.

Accepted Answer

An indorsement is made by adding the sig...

Exam 39: Negotiation and Holder in Due Course

With instruments payable at a definite time,Revised Article 3 requires that if:

Correct Answer
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A holder in due course takes a negotiable instrument free of all:

Correct Answer
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Which of the following statements is true for a restrictive indorsement?

Correct Answer
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A forged indorsement will not prevent a person from becoming a holder in due course.

Correct Answer
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Explain the nature and meaning of an indorsement.

Correct Answer
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An indorsement is made by adding the sig...
View Answer

In case of an indorsement for collection,any person other than a bank who purchases the check is considered to have converted the check unless the indorser received the amount paid for it.

Correct Answer
verified

If an instrument is made payable to cash,it is called bearer paper.

Correct Answer
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If an order instrument is transferred without indorsement:

Correct Answer
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In order to become a holder in due course,a person who takes a negotiable instrument must be a holder,and take the instrument:

Correct Answer
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Correct Answer
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Claims and defenses to payment of an instrument that go to the validity of an instrument are known as real defenses.

Correct Answer
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Any person who can trace his title to an instrument back to a holder in due course receives rights similar to a holder in due course even if he cannot meet the requirements himself.This is known as the _______.

Correct Answer
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A qualified indorsement:

Correct Answer
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An order paper can be negotiated by the bearer by transfer alone.

Correct Answer
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Terry has a check indorsed "Pay to the order of Terry." Terry gives the check to Jane without indorsing it.Is Jane a holder?

Correct Answer
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Indorsing an instrument,"Pay to Sara Garcia," limits payment to Sara Garcia and further negotiation becomes void.

Correct Answer
verified

A "claim in recoupment":

Correct Answer
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The transfer of possession (whether voluntary or involuntary) of a negotiable instrument by a person (other than the issuer) to another person who becomes its holder is known as __.

Correct Answer
verified

By indorsing an instrument,a person incurs an obligation to pay it if the person primarily liable on it fails to pay it.

Correct Answer
verified

To negotiate an instrument:

Correct Answer
verified

Exam 39: Negotiation and Holder in Due Course

With instruments payable at a definite time,Revised Article 3 requires that if:

Correct AnswerverifiedShow Answer

A holder in due course takes a negotiable instrument free of all:

Correct AnswerverifiedShow Answer

Which of the following statements is true for a restrictive indorsement?

Correct AnswerverifiedShow Answer

A forged indorsement will not prevent a person from becoming a holder in due course.

Correct AnswerverifiedShow Answer

Explain the nature and meaning of an indorsement.

Correct AnswerverifiedAn indorsement is made by adding the sig...View AnswerShow Answer

In case of an indorsement for collection,any person other than a bank who purchases the check is considered to have converted the check unless the indorser received the amount paid for it.

Correct AnswerverifiedShow Answer

If an instrument is made payable to cash,it is called bearer paper.

Correct AnswerverifiedShow Answer

If an order instrument is transferred without indorsement:

Correct AnswerverifiedShow Answer

In order to become a holder in due course,a person who takes a negotiable instrument must be a holder,and take the instrument:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Claims and defenses to payment of an instrument that go to the validity of an instrument are known as real defenses.

Correct AnswerverifiedShow Answer

Any person who can trace his title to an instrument back to a holder in due course receives rights similar to a holder in due course even if he cannot meet the requirements himself.This is known as the _______.

Correct AnswerverifiedShow Answer

A qualified indorsement:

Correct AnswerverifiedShow Answer

An order paper can be negotiated by the bearer by transfer alone.

Correct AnswerverifiedShow Answer

Terry has a check indorsed "Pay to the order of Terry." Terry gives the check to Jane without indorsing it.Is Jane a holder?

Correct AnswerverifiedShow Answer

Indorsing an instrument,"Pay to Sara Garcia," limits payment to Sara Garcia and further negotiation becomes void.

Correct AnswerverifiedShow Answer

A "claim in recoupment":

Correct AnswerverifiedShow Answer

The transfer of possession (whether voluntary or involuntary) of a negotiable instrument by a person (other than the issuer) to another person who becomes its holder is known as __.

Correct AnswerverifiedShow Answer

By indorsing an instrument,a person incurs an obligation to pay it if the person primarily liable on it fails to pay it.

Correct AnswerverifiedShow Answer

To negotiate an instrument:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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An indorsement is made by adding the sig...
View Answer

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verified

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Correct Answer
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