Question 1

Bob receives a check from Chris. Without Bob's knowledge, Dan indorses it in his own name and deposits it in his account at Elm City Bank. In Bob's subsequent suit against the bank for the money, the court will most likely rule in favor of

Accepted Answer

A)   Bob, because Dan's signature is not authorized.
B)   Bob, because Elm City Bank is not a holder in due course.
C)   Elm City Bank, because Dan's signature is not authorized.
D)   Elm City Bank, because it is a holder in due course.E) B) and C)
F) B) and D)

Question 2

If a person purchasing an instrument does not know and has no reason to know that it has been dishonored, the person cannot become an HDC.

Accepted Answer

A) True 
 B)False

Question 3

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is

Accepted Answer

A)   a holding.
B)   an assignment.
C)   negotiation.
D)   presentment.E) A) and B)
F) B) and C)

Question 4

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,00-the alteration is obvious-and transfers it to eReady Sets, Inc., in exchange for a 3D HD TV. eReady deposits the check in its bank account at First Town Bank. HDCs of this check include

Accepted Answer

A)   Clem, eReady, and First Town Bank.
B)   Clem only.
C)   eReady and First Town Bank only.
D)   none of these parties.E) A) and B)
F) A) and D)

Question 5

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

Accepted Answer

A)   acquires possession of the negotiable instrument.
B)   agrees with Eton to buy the negotiable instrument.
C)   pays the face value due on the instrument.
D)   transfers the instrument to another party.E) None of the above
F) A) and B)

Question 6

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

Accepted Answer

A) True 
 B)False

Question 7

For an ordinary holder to become an HDC, the holder must have acted honestly in the process of acquiring the instrument.

Accepted Answer

A) True 
 B)False

Question 8

Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie. The price of the shares is constantly fluctuating. Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase. Eppie agrees. Fund Investments 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 Hasty Accounting Services, which takes the check in good faith and without notice of Fund Investments's act. Hasty later learns that Fund Investments was not authorized to fill in the check for $1,000 over the price. Is Hasty an HDC If so, for how much

Accepted Answer

Hasty is an HDC to the extent of $5,000,...

Question 9

Velma transfers a note by signing it and delivering it to Woz. Woz is

Accepted Answer

A)   a delivery person.
B)   an indorsee.
C)   a note passer.
D)   a promisee.E) C) and D)
F) All of the above

Question 10

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

Accepted Answer

A) True 
 B)False

Question 11

An instrument payable to two persons jointly requires the indorsement of only one of the payees for negotiation.

Accepted Answer

A) True 
 B)False

Question 12

Indorsement can convert an order instrument into a bearer instrument

Accepted Answer

A) True 
 B)False

Question 13

A person who accepts an instrument that has been completed without knowing that it was incomplete when issued can take it as an HDC.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A special indorsement does not specify a particular indorsee.

Accepted Answer

A) True 
 B)False  False

Question 16

To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper indorsement of the check is

Accepted Answer

A)   not possible.
B)   "Smith" and "Jones" only.
C)   "Smith" only, or "Jones" only, but not "Smith" and "Jones."
D)   "Smith" only, or "Jones" only, or "Smith" and "Jones."E) A) and D)
F) All of the above D

Question 17

A negotiable instrument can only be transferred by negotiation.

Accepted Answer

A) True 
 B)False

Question 18

The effect of a conditional indorsement on the back of an instrument is the same as the effect of conditional language that appears on its face.

Accepted Answer

A) True 
 B)False  False

Question 19

Ivy signs a check payable to Jon and gives it to him. Jon indorses the back, and transfers the check to Ked. To negotiate the check to Luis, Ked must

Accepted Answer

A)   write "Ked" on the back.
B)   write "pay to the order of Luis [signed] Ked" on the back.
C)   deliver the check to Luis.
D)   obtain Luis's signature on the back.E) All of the above
F) A) and D)

Question 20

Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is

Accepted Answer

A)   an assignment.
B)   a negotiation.
C)   a payment.
D)   a sale.E) None of the above
F) A) and B)

Exam 25: Transferability and Holder in Due Course

Bob receives a check from Chris. Without Bob's knowledge, Dan indorses it in his own name and deposits it in his account at Elm City Bank. In Bob's subsequent suit against the bank for the money, the court will most likely rule in favor of

Correct Answer
verified

If a person purchasing an instrument does not know and has no reason to know that it has been dishonored, the person cannot become an HDC.

Correct Answer
verified

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is

Correct Answer
verified

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,00-the alteration is obvious-and transfers it to eReady Sets, Inc., in exchange for a 3D HD TV. eReady deposits the check in its bank account at First Town Bank. HDCs of this check include

Correct Answer
verified

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

Correct Answer
verified

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

Correct Answer
verified

For an ordinary holder to become an HDC, the holder must have acted honestly in the process of acquiring the instrument.

Correct Answer
verified

Correct Answer
verified
Hasty is an HDC to the extent of $5,000,...
View Answer

Velma transfers a note by signing it and delivering it to Woz. Woz is

Correct Answer
verified

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

Correct Answer
verified

An instrument payable to two persons jointly requires the indorsement of only one of the payees for negotiation.

Correct Answer
verified

Indorsement can convert an order instrument into a bearer instrument

Correct Answer
verified

A person who accepts an instrument that has been completed without knowing that it was incomplete when issued can take it as an HDC.

Correct Answer
verified

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

Correct Answer
verified

A special indorsement does not specify a particular indorsee.

Correct Answer
verified
False

To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper indorsement of the check is

Correct Answer
verified
D

A negotiable instrument can only be transferred by negotiation.

Correct Answer
verified

The effect of a conditional indorsement on the back of an instrument is the same as the effect of conditional language that appears on its face.

Correct Answer
verified
False

Ivy signs a check payable to Jon and gives it to him. Jon indorses the back, and transfers the check to Ked. To negotiate the check to Luis, Ked must

Correct Answer
verified

Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is

Correct Answer
verified

Exam 25: Transferability and Holder in Due Course

Bob receives a check from Chris. Without Bob's knowledge, Dan indorses it in his own name and deposits it in his account at Elm City Bank. In Bob's subsequent suit against the bank for the money, the court will most likely rule in favor of

Correct AnswerverifiedShow Answer

If a person purchasing an instrument does not know and has no reason to know that it has been dishonored, the person cannot become an HDC.

Correct AnswerverifiedShow Answer

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is

Correct AnswerverifiedShow Answer

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,00-the alteration is obvious-and transfers it to eReady Sets, Inc., in exchange for a 3D HD TV. eReady deposits the check in its bank account at First Town Bank. HDCs of this check include

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A holder does not take an instrument for value if he or she gives a negotiable instrument as payment.

Correct AnswerverifiedShow Answer

For an ordinary holder to become an HDC, the holder must have acted honestly in the process of acquiring the instrument.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedHasty is an HDC to the extent of $5,000,...View AnswerShow Answer

Velma transfers a note by signing it and delivering it to Woz. Woz is

Correct AnswerverifiedShow Answer

An indorser who does not wish to be liable on an instrument can use a qualified indorsement.

Correct AnswerverifiedShow Answer

An instrument payable to two persons jointly requires the indorsement of only one of the payees for negotiation.

Correct AnswerverifiedShow Answer

Indorsement can convert an order instrument into a bearer instrument

Correct AnswerverifiedShow Answer

A person who accepts an instrument that has been completed without knowing that it was incomplete when issued can take it as an HDC.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A special indorsement does not specify a particular indorsee.

Correct AnswerverifiedFalse

To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper indorsement of the check is

Correct AnswerverifiedD

A negotiable instrument can only be transferred by negotiation.

Correct AnswerverifiedShow Answer

The effect of a conditional indorsement on the back of an instrument is the same as the effect of conditional language that appears on its face.

Correct AnswerverifiedFalse

Ivy signs a check payable to Jon and gives it to him. Jon indorses the back, and transfers the check to Ked. To negotiate the check to Luis, Ked must

Correct AnswerverifiedShow Answer

Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is

Correct AnswerverifiedShow Answer

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Hasty is an HDC to the extent of $5,000,...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

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D

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False

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