Question 1

Serayah received a check written by Sam whom she did not really trust. Accordingly, she rushed to his bank to get the check cashed. The bank told her that presentment would be considered as being made on the next business day and refused to immediately give her the funds. The bank representative told her that the bank's cut-off hour was 2:00 p.m. and that she did not present the check until 3:00 p.m. Serayah was upset and told the bank that it wrongfully dishonored the check in violation of provisions of the UCC. Discuss the rights of the parties.

Accepted Answer

A bank to which presentment is made may ...

Question 2

A bank is primarily liable for the amount of a check when it accepts the check.

Accepted Answer

A) True 
 B)False  True

Question 3

If an accommodation party pays a note for an accommodated party, the accommodation party has a right of action against the accommodated party to recover the money paid.

Accepted Answer

A) True 
 B)False

Question 4

There are two types of relevant warranties in regards to instruments: ________ and ________

Accepted Answer

A)   acknowledgment and transfer.
B)   presentment and transfer.
C)   transfer and presentment.
D)   acknowledged and presentment.
E)   limited and general.F) B) and C)
G) A) and D)

Question 5

When, if ever, will a party's negligence block a party from escaping liability for an unauthorized signature?

Accepted Answer

A)   Any type of negligence will result in a party being liable for an unauthorized signature.
B)   The issue of negligence will not as a matter of law block a party from escaping liability for an unauthorized signature.
C)   A party who is negligent may not escape liability for an unauthorized signature if the party whose signature was forged behaved so negligently as to substantially contribute to the making of the forgery.
D)   A party's negligence will make the party liable for an unauthorized signature only if the negligence amounts to a finding of recklessness.
E)   A party's negligence will make the party liable for an unauthorized signature only if the negligence rises to the level of gross negligence.F) A) and B)
G) A) and C)

Question 6

[Roommate Troubles] Dexter, Bernard, and Garren were roommates who do not get along and decide to go their separate ways when their lease expires on May 31. Dexter owes Bernard $500 and signs a promissory note that he will pay Bernard $500 by July 1. Bernard, who owes Garren money, endorses the back of the note and writes "Pay to the order of Garren" on the back and gives the note to Garren. On July 2, Garren tells Dexter that Bernard signed the promissory note to him, so Dexter should just pay Garren the $500. Dexter refuses to pay Garren anything. Garren then tells Bernard that Dexter dishonored the note and sues Bernard for the value of the note.
-Assuming there is proper presentment and notice of dishonor, can Bernard be held liable on the promissory note?

Accepted Answer

A)   Yes, and he can sue Dexter who is primarily liable for the note.
B)   Yes, but he has no recourse against Dexter.
C)   No, only Dexter can be held liable.
D)   No, because he is not primarily liable.
E)   Garren has no recourse since he is not a holder in due course.F) B) and D)
G) A) and C)

Question 7

The principal's name must be shown on the instrument in order for the principal to be held liable when an agent signs a note on behalf of the principal.

Accepted Answer

A) True 
 B)False

Question 8

Under what circumstances might Charla be held personally liable for the note?

Accepted Answer

A)   If Jirah is a holder in due course.
B)   If Jirah is a holder in due course and unaware that Charla signed on behalf of Prida's.
C)   If Jirah is unaware that Charla signed on behalf of Prida's.
D)   If Charla failed to disclose that she was an agent of Prida's.
E)   If Jirah is not a holder in due course and unaware that Charla signed on behalf of Prida's.F) A) and C)
G) B) and D)

Question 9

Who is the drawee of the check Chloe presented to The Furniture Shop?

Accepted Answer

A)   Chloe
B)   The Furniture Shop
C)   Rabia, as primary owner of The Furniture Shop
D)   Chloe's bank
E)   Rabia's bankF) B) and E)
G) A) and D)

Question 10

Which of the following is true regarding the liability of an accommodation party?

Accepted Answer

A)   As a maker, an accommodation party has primary liability; but as an endorser, the party has secondary liability.
B)   An accommodation party has primary liability both as a maker and as an endorser.
C)   An accommodation party has secondary liability both as a maker and as an endorser.
D)   An accommodation party has primary liability as either a maker or endorser only if all other parties to the instrument have filed bankruptcy.
E)   An accommodation party has primary liability as a maker only if all other parties have filed bankruptcy, and secondary liability in any other case regardless of whether the accommodation party is the maker or endorser.F) B) and D)
G) All of the above

Question 11

A(n)  ________ is a party who has authority to act on behalf of and bind another party.

Accepted Answer

A)   agent
B)   principal
C)   warrantor
D)   transferor
E)   endorseeF) D) and E)
G) A) and E)

Question 12

Which of the following is the most likely result if an agent admits to the principal that a check for the principal was forged by the agent and placed into the agent's bank account, but the principal does nothing until two months later after the agent leaves town with the funds?

Accepted Answer

A)   Because the checks were forged, the principal can receive reimbursement of the funds from any maker involved or any bank that cashed the checks.
B)   The principal can receive reimbursement from makers of the checks only.
C)   The principal can receive reimbursement from any bank that cashed the checks only.
D)   It is likely that it will be determined that the principal ratified the signatures and that the principal cannot recover from either makers or banks that cashed the checks.
E)   The principal can recover from either the makers or any banks who cashed the checks only if it can be shown that the agent cannot be located for criminal prosecution.F) B) and E)
G) D) and E)

Question 13

After notice of dishonor is received, how long do parties other than a collecting bank have in order to give notice of dishonor to a secondarily liable party?

Accepted Answer

A)   It must be given before midnight of the next day.
B)   It must be given within 48 hours.
C)   It must be given within 7 days.
D)   It must be given within 10 days.
E)   It must be given within 30 days.F) C) and E)
G) A) and C)

Question 14

According to the UCC, a party's signature can be any name or word, but cannot be a mark or symbol to authenticate a writing.

Accepted Answer

A) True 
 B)False

Question 15

List the five items that a party warrants when the party transfers an instrument for consideration.

Accepted Answer

When a party transfers an instrument for...

Question 16

[Run Around] Hema issues a promissory note to Rahul. Rahul endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Floyd. Floyd presents the note to Hema for payment. When Floyd presents the note to Hema, she asks him for reasonable identification. He did not have any identification with him and told her that she had no right to dishonor the instrument. Hema continued to insist, so finally, on the same day, Rahul obtained clear identification and presented it to her. Nevertheless, even with proper identification, Hema refused to pay the note, claiming that she lacked the funds with which to do so. After properly providing notification of dishonor to both Anne and Rahul, Floyd requested that Anne pay the note, but she told him that he would have to get his money from Rahul. Floyd has been trying to call Rahul for 35 days, but Rahul did not return his telephone calls. Floyd is exasperated; and within 40 days of when Hema refuses payment, he notifies Hema, Rahul, and Anne that the promissory note has been dishonored by Hema and that he is asserting liability on the note against all of them. Hema calls him up and says that she never dishonored the note, she simply lacks the funds with which to immediately pay and thinks that he should seek recovery elsewhere.
-Which of the following is the likely result if Floyd sues Anne, Rahul, and Hema?

Accepted Answer

A)   The judge is likely to rule that Floyd can recover from Anne, Rahul, or Hema; but in the event Anne pays Floyd, she can recover from Rahul or Hema; and in the event that Rahul pays Floyd, he can recover from Hema.
B)   The judge is likely to rule that Floyd's only option of recovery is against Hema.
C)   The judge is likely to rule that Floyd's only option of recovery is against Anne because she provided the note to him, but that Anne can recover from either Rahul or Hema and that if Rahul pays Anne, he can recover from Hema.
D)   The judge is likely to rule that Floyd can recover against Rahul and that Rahul may recover against Hema, but Floyd cannot recover directly from Anne because she is too far removed from the maker.
E)   The judge is likely to rule that Floyd's only option for recovery is against Rahul who may then recover against Hema.F) B) and E)
G) All of the above

Question 17

Carl, without Austin's knowledge, impersonates Austin and thereby convinces Lucía, who has never seen Austin, to write a check to Austin for upcoming yard work. Carl then forges Austin's name and deposits the check into his, Carl's, account. Which of the following is true regarding whether Lucía will be liable for the amount of the check?

Accepted Answer

A)   Under the forgery rule, Lucía will be held liable.
B)   Under the transferor rule, Lucía will be held liable.
C)   Under the payee rule, Lucía will be held liable.
D)   Under the imposter rule, Lucía will be held liable.
E)   Under the fictitious payee rule, Lucía will not be held liable.F) B) and E)
G) C) and D) D

Question 18

[Roommate Troubles] Dexter, Bernard, and Garren were roommates who do not get along and decide to go their separate ways when their lease expires on May 31. Dexter owes Bernard $500 and signs a promissory note that he will pay Bernard $500 by July 1. Bernard, who owes Garren money, endorses the back of the note and writes "Pay to the order of Garren" on the back and gives the note to Garren. On July 2, Garren tells Dexter that Bernard signed the promissory note to him, so Dexter should just pay Garren the $500. Dexter refuses to pay Garren anything. Garren then tells Bernard that Dexter dishonored the note and sues Bernard for the value of the note.
-Who is primarily liable on the promissory note and who is secondarily liable?

Accepted Answer

A)   Both Dexter and Bernard are primarily liable on the note.
B)   Dexter is primarily liable and Garren is secondarily liable.
C)   Bernard is primarily liable and Garren is secondarily liable.
D)   Dexter is primarily liable and Bernard is secondarily liable.
E)   Bernard is primarily liable and Dexter is secondarily liable.F) A) and B)
G) A) and C)

Question 19

A defense that is available to a party who is tricked into signing a negotiable instrument without having a chance to determine that it is, in fact, a negotiable instrument is known as ________.

Accepted Answer

A)   negligence
B)   recklessness
C)   malice
D)   strict liability
E)   fraud in the factumF) A) and C)
G) A) and B) E

Question 20

Which of the following is false regarding the means by which an instrument may be cancelled by a person entitled to enforce it?

Accepted Answer

A)   Consideration is necessary before a cancellation, a form of contractual agreement, is effective.
B)   A party may cancel an instrument by simply writing "paid" on the instrument.
C)   A party may cancel an instrument by intentionally destroying the instrument.
D)   A party may cancel an instrument by intentionally mutilating the instrument.
E)   A party may cancel an instrument by giving the instrument to the obliged party.F) A) and D)
G) None of the above

Exam 28: Liability, Defenses, and Discharge

Correct Answer
verified
A bank to which presentment is made may ...
View Answer

A bank is primarily liable for the amount of a check when it accepts the check.

Correct Answer
verified
True

If an accommodation party pays a note for an accommodated party, the accommodation party has a right of action against the accommodated party to recover the money paid.

Correct Answer
verified

There are two types of relevant warranties in regards to instruments: and

Correct Answer
verified

When, if ever, will a party's negligence block a party from escaping liability for an unauthorized signature?

Correct Answer
verified

Correct Answer
verified

The principal's name must be shown on the instrument in order for the principal to be held liable when an agent signs a note on behalf of the principal.

Correct Answer
verified

Under what circumstances might Charla be held personally liable for the note?

Correct Answer
verified

Who is the drawee of the check Chloe presented to The Furniture Shop?

Correct Answer
verified

Which of the following is true regarding the liability of an accommodation party?

Correct Answer
verified

A(n) ________ is a party who has authority to act on behalf of and bind another party.

Correct Answer
verified

Which of the following is the most likely result if an agent admits to the principal that a check for the principal was forged by the agent and placed into the agent's bank account, but the principal does nothing until two months later after the agent leaves town with the funds?

Correct Answer
verified

After notice of dishonor is received, how long do parties other than a collecting bank have in order to give notice of dishonor to a secondarily liable party?

Correct Answer
verified

According to the UCC, a party's signature can be any name or word, but cannot be a mark or symbol to authenticate a writing.

Correct Answer
verified

List the five items that a party warrants when the party transfers an instrument for consideration.

Correct Answer
verified
When a party transfers an instrument for...
View Answer

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

A defense that is available to a party who is tricked into signing a negotiable instrument without having a chance to determine that it is, in fact, a negotiable instrument is known as ________.

Correct Answer
verified
E

Which of the following is false regarding the means by which an instrument may be cancelled by a person entitled to enforce it?

Correct Answer
verified

Exam 28: Liability, Defenses, and Discharge

Correct AnswerverifiedA bank to which presentment is made may ...View AnswerShow Answer

A bank is primarily liable for the amount of a check when it accepts the check.

Correct AnswerverifiedTrue

If an accommodation party pays a note for an accommodated party, the accommodation party has a right of action against the accommodated party to recover the money paid.

Correct AnswerverifiedShow Answer

There are two types of relevant warranties in regards to instruments: ________ and ________

Correct AnswerverifiedShow Answer

When, if ever, will a party's negligence block a party from escaping liability for an unauthorized signature?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The principal's name must be shown on the instrument in order for the principal to be held liable when an agent signs a note on behalf of the principal.

Correct AnswerverifiedShow Answer

Under what circumstances might Charla be held personally liable for the note?

Correct AnswerverifiedShow Answer

Who is the drawee of the check Chloe presented to The Furniture Shop?

Correct AnswerverifiedShow Answer

Which of the following is true regarding the liability of an accommodation party?

Correct AnswerverifiedShow Answer

A(n) ________ is a party who has authority to act on behalf of and bind another party.

Correct AnswerverifiedShow Answer

Which of the following is the most likely result if an agent admits to the principal that a check for the principal was forged by the agent and placed into the agent's bank account, but the principal does nothing until two months later after the agent leaves town with the funds?

Correct AnswerverifiedShow Answer

After notice of dishonor is received, how long do parties other than a collecting bank have in order to give notice of dishonor to a secondarily liable party?

Correct AnswerverifiedShow Answer

According to the UCC, a party's signature can be any name or word, but cannot be a mark or symbol to authenticate a writing.

Correct AnswerverifiedShow Answer

List the five items that a party warrants when the party transfers an instrument for consideration.

Correct AnswerverifiedWhen a party transfers an instrument for...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

Correct AnswerverifiedShow Answer

A defense that is available to a party who is tricked into signing a negotiable instrument without having a chance to determine that it is, in fact, a negotiable instrument is known as ________.

Correct AnswerverifiedE

Which of the following is false regarding the means by which an instrument may be cancelled by a person entitled to enforce it?

Correct AnswerverifiedShow Answer

Correct Answer
verified
A bank to which presentment is made may ...
View Answer

Correct Answer
verified
True

Correct Answer
verified

There are two types of relevant warranties in regards to instruments: and

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
When a party transfers an instrument for...
View Answer

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified
E

Correct Answer
verified