Question 1

Equity Credit Company has in its possession an instrument dated May 1, 2019. The instrument is payable to the order of First Choice Moving & Storage Company "on June 1, 2020," for $5,000. In the upper left corner is an address for Greater Metro Development Corporation-10 Corporate Park Avenue, Chicago, Illinois-and in the lower right corner is the signature of "Hilltop Investments, Inc., By Ida, President." In the lower left corner is stamped "ACCEPTED: Greater Metro Development Corporation by John, President, May 5, 2019." On the back is the signature of "First Choice Moving & Storage Company by Kathleen, President." Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?

Accepted Answer

No one is primarily liable on this instr...

Question 2

A holder who takes a negotiable instrument from a thief cannot become an HDC even if the item was acquired in good faith and there was no reason to be suspicious of the transaction.

Accepted Answer

A) True 
 B)False

Question 3

Jane signs an instrument using a "J" with a swirl around it. With this mark for a signature, the instrument is

Accepted Answer

A)   negotiable.
B)   nonnegotiable, because an initial does not state the signer's name.
C)   nonnegotiable, because an initial is not a signature.
D)   nonnegotiable, because a simple initial implies a lack of binding intent.E) None of the above
F) C) and D)

Question 4

Fred has six nieces, ages five to sixteen. He writes an order instrument for $50 that states "Pay to the order of my niece." The order instrument is

Accepted Answer

A)   negotiable.
B)   nonnegotiable, because the amount of money is less than $500.
C)   nonnegotiable, because it is illegal to write an order instrument payable to a relative.
D)   nonnegotiable, because there is no specific person identified.E) C) and D)
F) A) and B)

Question 5

In terms of requirements for holder-in-due-course (HDC) status, first a party must be a holder of a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 6

Emily writes and signs a check payable to "Festival Cinema." Georg, Festival's manager, indorses the check "For deposit only." This is

Accepted Answer

A)   a blank indorsement.
B)   a qualified indorsement.
C)   a restrictive indorsement.
D)   a special indorsement.E) All of the above
F) B) and C)

Question 7

If Elin delivers a check payable to her order to First Bank without signing it and receives cash, the transfer is an assignment, not a negotiation.

Accepted Answer

A) True 
 B)False  True

Question 8

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

Accepted Answer

A)   an HDC.
B)   not an HDC, because Kiley did not acquire the instrument for value.
C)   not an HDC, because Kiley did not acquire the instrument in good faith.
D)   not an HDC, because Kiley transferred the instrument without notice.E) B) and C)
F) A) and B)

Question 9

To determine the value of an instrument, it is necessary to know when the maker, drawer, or acceptor is required to pay.

Accepted Answer

A) True 
 B)False

Question 10

On an instrument, a mere reference to another writing-"As per contract"- does not render the instrument nonnegotiable.

Accepted Answer

A) True 
 B)False

Question 11

Any instrument that orders the drawee to pay a certain sum of money is a draft.

Accepted Answer

A) True 
 B)False

Question 12

To operate practically as a substitute for cash or a credit device, a negotiable instrument must be

Accepted Answer

A)   conditional without the risk of being collectable.
B)   transferable without the danger of being uncollectable.
C)   qualified with a promise to set aside the qualification.
D)   payable without recourse.E) All of the above
F) None of the above

Question 13

With an order instrument, the payee must be identified with certainty because the transfer of the instrument requires his or her signature.

Accepted Answer

A) True 
 B)False

Question 14

Employment Company draws a check payable to Felix. Felix indorses the back and negotiates the check to Guaranty Bank. Primarily liable on the check is

Accepted Answer

A)   Employment Company.
B)   Felix.
C)   Guaranty Bank.
D)   none of the choices.E) A) and C)
F) A) and B) D

Question 15

The holder of a note who needs the funds owed on it can transfer it for cash to a third party, whom the maker must pay when the note comes due.

Accepted Answer

A) True 
 B)False

Question 16

Muni Investment Company signs a check payable to Notes & Loans, Inc., to buy a promissory note executed by Omni Corporation. This check

Accepted Answer

A)   does not constitute sufficient consideration for HDC status.
B)   does not satisfy the value requirement for HDC status.
C)   satisfies the consideration requirement for HDC status.
D)   satisfies the value requirement for HDC status.E) B) and D)
F) A) and D)

Question 17

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

Accepted Answer

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 D)
F) A) and C)

Question 18

Rico agrees to buy a bicycle from Salvatore for $250. Salvatore agrees to deliver the bike on September 1. Rico writes a draft for $250 payable to Salvatore on September 1. This is

Accepted Answer

A)   none of the choices.
B)   a time draft.
C)   a sight draft.
D)   a promissory note.E) C) and D)
F) None of the above

Question 19

Logan is Mining Corporation's agent and is authorized to write checks on Mining's account in Northwest Bank. Logan writes a check "pay to the order of Oceanside Resort." Logan signs the check "Mining Corporation, by Logan, agent." Northwest Bank dishonors the check. Liability extends to

Accepted Answer

A)   Logan.
B)   Oceanside.
C)   Mining Corporation.
D)   no one.E) B) and C)
F) A) and D) C

Question 20

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

Accepted Answer

A)   is clearly stamped "insufficient funds."
B)   contains handwritten terms.
C)   is undated.
D)   all of the choices.E) A) and B)
F) B) and D)

Exam 22: Negotiable Instruments

Correct Answer
verified
No one is primarily liable on this instr...
View Answer

A holder who takes a negotiable instrument from a thief cannot become an HDC even if the item was acquired in good faith and there was no reason to be suspicious of the transaction.

Correct Answer
verified

Jane signs an instrument using a "J" with a swirl around it. With this mark for a signature, the instrument is

Correct Answer
verified

Fred has six nieces, ages five to sixteen. He writes an order instrument for $50 that states "Pay to the order of my niece." The order instrument is

Correct Answer
verified

In terms of requirements for holder-in-due-course (HDC) status, first a party must be a holder of a negotiable instrument.

Correct Answer
verified

Emily writes and signs a check payable to "Festival Cinema." Georg, Festival's manager, indorses the check "For deposit only." This is

Correct Answer
verified

If Elin delivers a check payable to her order to First Bank without signing it and receives cash, the transfer is an assignment, not a negotiation.

Correct Answer
verified
True

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

Correct Answer
verified

To determine the value of an instrument, it is necessary to know when the maker, drawer, or acceptor is required to pay.

Correct Answer
verified

On an instrument, a mere reference to another writing-"As per contract"- does not render the instrument nonnegotiable.

Correct Answer
verified

Any instrument that orders the drawee to pay a certain sum of money is a draft.

Correct Answer
verified

To operate practically as a substitute for cash or a credit device, a negotiable instrument must be

Correct Answer
verified

With an order instrument, the payee must be identified with certainty because the transfer of the instrument requires his or her signature.

Correct Answer
verified

Employment Company draws a check payable to Felix. Felix indorses the back and negotiates the check to Guaranty Bank. Primarily liable on the check is

Correct Answer
verified
D

The holder of a note who needs the funds owed on it can transfer it for cash to a third party, whom the maker must pay when the note comes due.

Correct Answer
verified

Muni Investment Company signs a check payable to Notes & Loans, Inc., to buy a promissory note executed by Omni Corporation. This check

Correct Answer
verified

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

Correct Answer
verified

Rico agrees to buy a bicycle from Salvatore for $250. Salvatore agrees to deliver the bike on September 1. Rico writes a draft for $250 payable to Salvatore on September 1. This is

Correct Answer
verified

Logan is Mining Corporation's agent and is authorized to write checks on Mining's account in Northwest Bank. Logan writes a check "pay to the order of Oceanside Resort." Logan signs the check "Mining Corporation, by Logan, agent." Northwest Bank dishonors the check. Liability extends to

Correct Answer
verified
C

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

Correct Answer
verified

Exam 22: Negotiable Instruments

Correct AnswerverifiedNo one is primarily liable on this instr...View AnswerShow Answer

A holder who takes a negotiable instrument from a thief cannot become an HDC even if the item was acquired in good faith and there was no reason to be suspicious of the transaction.

Correct AnswerverifiedShow Answer

Jane signs an instrument using a "J" with a swirl around it. With this mark for a signature, the instrument is

Correct AnswerverifiedShow Answer

Fred has six nieces, ages five to sixteen. He writes an order instrument for $50 that states "Pay to the order of my niece." The order instrument is

Correct AnswerverifiedShow Answer

In terms of requirements for holder-in-due-course (HDC) status, first a party must be a holder of a negotiable instrument.

Correct AnswerverifiedShow Answer

Emily writes and signs a check payable to "Festival Cinema." Georg, Festival's manager, indorses the check "For deposit only." This is

Correct AnswerverifiedShow Answer

If Elin delivers a check payable to her order to First Bank without signing it and receives cash, the transfer is an assignment, not a negotiation.

Correct AnswerverifiedTrue

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

Correct AnswerverifiedShow Answer

To determine the value of an instrument, it is necessary to know when the maker, drawer, or acceptor is required to pay.

Correct AnswerverifiedShow Answer

On an instrument, a mere reference to another writing-"As per contract"- does not render the instrument nonnegotiable.

Correct AnswerverifiedShow Answer

Any instrument that orders the drawee to pay a certain sum of money is a draft.

Correct AnswerverifiedShow Answer

To operate practically as a substitute for cash or a credit device, a negotiable instrument must be

Correct AnswerverifiedShow Answer

With an order instrument, the payee must be identified with certainty because the transfer of the instrument requires his or her signature.

Correct AnswerverifiedShow Answer

Employment Company draws a check payable to Felix. Felix indorses the back and negotiates the check to Guaranty Bank. Primarily liable on the check is

Correct AnswerverifiedD

The holder of a note who needs the funds owed on it can transfer it for cash to a third party, whom the maker must pay when the note comes due.

Correct AnswerverifiedShow Answer

Muni Investment Company signs a check payable to Notes & Loans, Inc., to buy a promissory note executed by Omni Corporation. This check

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Rico agrees to buy a bicycle from Salvatore for $250. Salvatore agrees to deliver the bike on September 1. Rico writes a draft for $250 payable to Salvatore on September 1. This is

Correct AnswerverifiedShow Answer

Logan is Mining Corporation's agent and is authorized to write checks on Mining's account in Northwest Bank. Logan writes a check "pay to the order of Oceanside Resort." Logan signs the check "Mining Corporation, by Logan, agent." Northwest Bank dishonors the check. Liability extends to

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
No one is primarily liable on this instr...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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True

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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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D

Correct Answer
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C

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