Question 1

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) A) and B)
G) D) and E)

Question 2

Who is the drawer of the check Doreen presented to Betty at Hot Dresses Inc.,?

Accepted Answer

A)   Doreen.
B)   Hot Dresses Inc.
C)   Betty, as primary owner of Hot Dresses Inc.
D)   Doreen's bank.
E)   Betty's bank.F) C) and D)
G) A) and B)

Question 3

If an accommodated party pays a note when it is due,the accommodated party can force any accommodation party to contribute based upon the number of accommodation parties that exist.

Accepted Answer

A) True 
 B)False

Question 4

When a bank accepts a check,it is primarily liable for the amount of the check.

Accepted Answer

A) True 
 B)False

Question 5

The fact that a bank refuses to pay an instrument means that it has been dishonored.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true regarding Anne's statement to Henry that he must seek recovery from Bob?

Accepted Answer

A)   Anne is correct.
B)   Anne is correct only if Bob is able to pay and has not filed bankruptcy.
C)   Anne is correct in stating that Henry should seek recovery from Bob only if Millie has filed bankruptcy because, otherwise, Henry should be pursuing litigation against Millie.
D)   Anne is correct unless the note is for over $10,000, in which case Henry can seek recovery from her without resorting to recovery from Bob or Millie.
E)   Anne is incorrect. Henry may seek recovery from her without first seeking recovery from Bob.F) C) and D)
G) A) and E)

Question 7

Which of the following is not a real defense to enforcement of a negotiable instrument?

Accepted Answer

A)   Infancy (being below the legal age of consent) , to the extent that it makes a contract void
B)   Discharge through insolvency proceedings (bankruptcy) 
C)   Forgery
D)   Impairment of collateral
E)   Fraud in the factumF) C) and D)
G) A) and B)

Question 8

A[n] ______ party signs an instrument to provide credit for another party that has also signed the instrument.

Accepted Answer

A)   Agreeable
B)   Accommodation
C)   Agent
D)   Principle
E)   PromisorF) A) and B)
G) A) and C)

Question 9

Which of the following is true regarding types of warranty liability?

Accepted Answer

A)   There is only one type of warranty in regard to instruments, transfer.
B)   There is only one type of warranty in regard to instruments, presentment.
C)   There is only one type of warranty in regard to instruments, acknowledged.
D)   There are three types of warranties in regard to instruments, transfer, presentment, and acknowledged.
E)   There are two types of warranties in regard to instruments, transfer and presentment.F) C) and D)
G) A) and E)

Question 10

As long as an agent is authorized to sign a negotiable instrument on behalf of a principal,the agent's signature can create liability for the principal.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following promises to pay a set sum to the holder of a promissory note or certificate of deposit?

Accepted Answer

A)   Maker
B)   Acceptor
C)   Drawer
D)   Endorser
E)   PromisorF) A) and D)
G) C) and D)

Question 12

Which of the following is the most likely result if Henry refuses payment on the promissory note that was endorsed to Richard claiming that he never signed it?

Accepted Answer

A)   He will be liable because an official banking document was involved.
B)   He will not be liable because a party is never liable on a negotiable instrument when it is signed without knowledge that it is, in fact, a negotiable instrument.
C)   He will be liable unless he can establish that Richard was not a holder in due course.
D)   He can claim fraud in the factum, and whether he is liable or not will depend upon whether a court determines that he should have known what he was signing.
E)   He can claim fraud in the inducement, and he will not be liable regardless of whether or not he knew what he was signing.F) C) and D)
G) D) and E)

Question 13

When a holder presents an instrument in a timely and proper manner,but acceptance or payment is refused,the instrument has been ____.

Accepted Answer

A)   Destroyed
B)   Dishonored
C)   Converted
D)   Rejected
E)   RefusedF) All of the above
G) A) and B)

Question 14

Violet has authority to act on behalf of and bind Robert.Which of the following legal term describes Robert's position?

Accepted Answer

A)   Agent
B)   Principal
C)   Warrantor
D)   Transferor
E)   Real endorserF) A) and D)
G) A) and C)

Question 15

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) A) and D)
G) None of the above

Question 16

Which of the following is a party who has authority to act on behalf of and bind another party?

Accepted Answer

A)   An agent
B)   A principal
C)   A warrantor
D)   A transferor
E)   A real endorserF) All of the above
G) B) and E)

Question 17

What are the requirements for a holder to turn to secondarily liable parties?

Accepted Answer

The holder must:
(1)Present th...

Question 18

Real defenses apply to ____,whereas personal defenses do not apply to ____.

Accepted Answer

A)   All parties; holders in due course.
B)   Holders; holders in due course.
C)   Holders; holders.
D)   All parties; holders.
E)   All parties; endorsers.F) A) and B)
G) D) and E)

Question 19

Which of the following is the likely result if Henry sues Anne,Bob,and Millie?

Accepted Answer

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

Question 20

Which of the following is true regarding what is considered a commercially reasonable manner by which notice of dishonor may be given to a secondarily liable party?

Accepted Answer

A)   The only commercially reasonable manner for notice of dishonor recognized by the UCC is certified mail.
B)   The UCC recognizes two manners of delivery for notice of dishonor that are considered commercially reasonable: written and electronic.
C)   The only commercially reasonable manner recognized by the UCC for notice of dishonor is written mail.
D)   Due to advances in technology, the only commercially reasonable manner recognized by the UCC for notice of dishonor is electronic communication.
E)   The UCC recognizes that oral, written, and electronic communications are all commercially reasonable ways in which to provide notice of dishonor.F) B) and D)
G) A) and E)

Exam 28: Liability,defenses,and Discharge

Which of the following is the likely result if Henry sues Anne,Bob,and Millie?

Correct AnswerverifiedShow Answer

As long as an agent is authorized to sign a negotiable instrument on behalf of a principal,the agent's signature can create liability for the principal.

Correct AnswerverifiedShow Answer

Which of the following is true regarding Anne's statement to Henry that he must seek recovery from Bob?

Correct AnswerverifiedShow Answer

Real defenses apply to ____,whereas personal defenses do not apply to ____.

Correct AnswerverifiedShow Answer

The fact that a bank refuses to pay an instrument means that it has been dishonored.

Correct AnswerverifiedShow Answer

Which of the following is true regarding what is considered a commercially reasonable manner by which notice of dishonor may be given to a secondarily liable party?

Correct AnswerverifiedShow Answer

Which of the following is the most likely result if Henry refuses payment on the promissory note that was endorsed to Richard claiming that he never signed it?

Correct AnswerverifiedShow Answer

Violet has authority to act on behalf of and bind Robert.Which of the following legal term describes Robert's position?

Correct AnswerverifiedShow Answer

Who is the drawer of the check Doreen presented to Betty at Hot Dresses Inc.,?

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

Which of the following is not a real defense to enforcement of a negotiable instrument?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a holder presents an instrument in a timely and proper manner,but acceptance or payment is refused,the instrument has been ____.

Correct AnswerverifiedShow Answer

When a bank accepts a check,it is primarily liable for the amount of the check.

Correct AnswerverifiedShow Answer

What are the requirements for a holder to turn to secondarily liable parties?

Correct AnswerverifiedThe holder must:(1)Present th...View AnswerShow Answer

Which of the following is true regarding types of warranty liability?

Correct AnswerverifiedShow Answer

If an accommodated party pays a note when it is due,the accommodated party can force any accommodation party to contribute based upon the number of accommodation parties that exist.

Correct AnswerverifiedShow Answer

Which of the following is a party who has authority to act on behalf of and bind another party?

Correct AnswerverifiedShow Answer

A[n] ______ party signs an instrument to provide credit for another party that has also signed the instrument.

Correct AnswerverifiedShow Answer

Which of the following promises to pay a set sum to the holder of a promissory note or certificate of deposit?

Correct AnswerverifiedShow Answer

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Real defenses apply to ,whereas personal defenses do not apply to .

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The holder must:
(1)Present th...
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