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

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Question 21

Multiple Choice

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A negotiable instrument cannot be ________ if it is accidentally found or given to the wrong person.

A) accepted
B) effective
C) valid
D) delivered
E) handled

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

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Question 22

Multiple Choice

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Which statement is true regarding the requirement that a party take an instrument for value in order to be considered a holder in due course?

A) The party must provide consideration.
B) The party must have provided a bargained-for promise.
C) The party must take the instrument in exchange for a promise that has already been performed.
D) The party must have begun performance on a promise and have provided consideration.
E) The party must have provided consideration or received the note as a gift.

F) A) and D)
G) C) and D)

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Question 23

Multiple Choice

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Which of the following words are necessary for an endorsement to be considered qualified?

[Lost Check] Jenna Nguyen teaches business law at Learn-A-Lot University. Learn-A-Lot requested that all of the teachers ask the students to wear T-shirts with "Learn-A-Lot University Football" printed on the front on the day of the first football game. All of the teachers were asked to sell the shirts in class. A student, Quinn, wrote a check to Jenna for $10 for payment for one of the shirts. Quinn, however, put Jenna Nguyen as the payee. Jenna wanted to turn the check over to the school, so on the back of the check, she wrote, "Jenna Nguyen, without recourse." She then gave the check to the treasurer for Learn-A-Lot University, Amelia. Unfortunately, the treasurer for Learn-A-Lot dropped the check on the ground as she was going to the bank. A student, Brad, found the check and promptly took it to the bank and cashed it. The treasurer, Amelia, did not want to get into trouble, so she asked Jenna to personally cover the check because she said that Jenna had endorsed the check on the back guaranteeing payment. -Would the school be able to require that Jenna cover the amount of the check based on the law of negotiable instruments?

For an HDC to take an instrument "in good faith," how does the UCC define good faith?

What is meant by the term "delivery" in the process of negotiation?

An order instrument is payable to ________.

When an instrument is being transferred to an agent or trustee for the benefit of either the endorser or a third party, which kind of endorsement is used?

The statement, "Pay to Constance only," with the endorser's signature is an example of which of the following types of endorsements?

Under which of the following circumstances does a holder taking an instrument for value not become a holder in due course?

For negotiation, ________ requires only delivery of the instrument to the holder by the payee

If an issuer forgets to write the date on a check, what is the effect?

An instrument is dishonored when a party refuses to pay the instrument, such as when a bank refuses to pay because insufficient funds exist.

Which of the following is not an example of a restrictive endorsement?

A(n) ________ instrument becomes overdue at any time after the expressed due date on it.

[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 Marney's claim that the endorsement by Annie was illegal because the note misspelled Annie's name?

For negotiation, which of the following types of paper require delivery and an endorsement by the holder?

An endorsement that restricts the instrument such that it must be collected by a bank for the endorser or for a particular account and cannot be cashed is which of the following?

[Check Issues] Kelsey owns and operates a currency exchange. A regular customer, Rafe, comes in and cashes a $2,000 check issued by ABC Trucking. The day after Kelsey cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the checks she cashed for Rafe had been stolen. At the time she took the check, Kelsey was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Kelsey decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took Rafe's check, she took a check from another customer, Brett. It was later discovered that the check, which was four months old, was the subject of a dispute between Brett and the issuer of the check for whom Brett had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Brett had stopped payment on the checks. Kelsey claimed that as a holder in due course, she was entitled to payment on both checks. -What is the effect on Kelsey's status as a holder in due course in taking from the customer the check that was four months old?

The FTC created several rules in the 1970's that helped protect consumers against HDC abuses. What do these rules required every consumer credit contract or any purchase money loan to contain?