Question 1

For a holder to turn to secondarily liable parties,what are the requirements?

Accepted Answer

The answer of For a holder to turn to secondarily...

Question 2

Which of the following must occur for a drawer to become liable on a check?

Accepted Answer

A)  The two requirements are that 1) the holder of the instrument present the instrument to the drawer in a proper and timely fashion and 2) the holder establish that the check was wrongfully dishonored.
B)  The four requirements are that 1) the holder of the instrument present the instrument to the drawee in a proper and timely fashion,2) the instrument be dishonored,3) notice of the dishonor be given to the drawer,and 4) proof provided by the holder that the check was wrongfully dishonored.
C)  The three requirements are that 1) the holder of the instrument present the instrument to the drawee in a proper and timely fashion,2) the instrument be dishonored,and 3) notice of the dishonor be given to the drawer.
D)  The only requirement is that the holder of the instrument present the instrument to the drawer in a proper and timely fashion.
E)  The only requirement is that the holder of the instrument present the instrument to the drawee in a proper and timely fashion.F) A) and B)
G) A) and E)

Question 3

If Charla was not authorized to sign the note on behalf of Prida,but Prida subsequently accepted the cut diamonds to sell in her store,which of the following terms best describes the situation?

Accepted Answer

A)  Ratification
B)  Dishonor
C)  Accommodation
D)  Renunciation
E)  PresentmentF) A) and B)
G) C) and D)

Question 4

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 5

Which of the following is true about real defenses and personal defenses to liability for negotiable instruments?

Accepted Answer

A)  Real defenses due not apply to all parties.
B)  Only real defenses,and not personal defenses,are found in the UCC.
C)  Personal defenses do not apply to holders in due course.
D)  Real defenses only apply to financial institutions,such as banks.
E)  Real defenses due not apply to holders in due course.F) B) and C)
G) B) and E)

Question 6

A party who is primarily liable for an instrument must pay without resorting to any other party.

Accepted Answer

A) True 
 B)False  True

Question 7

Which kind of party signs an instrument to provide credit for another party that has also signed the instrument?

Accepted Answer

A)  Accommodation
B)  Agreeable
C)  Promisor
D)  Agent
E)  PrincipleF) B) and D)
G) A) and B)

Question 8

As defined in the UCC,under which of the following circumstances would presentment have occurred?

Accepted Answer

A)  When Rabia requested that Chloe make the check good.
B)  When XYZ Bank notified Rabia that it would not pay based upon insufficient funds.
C)  When ABC Bank requested payment from XYZ Bank.
D)  When Chloe presented the check to The Furniture Shop
E)  When Rabia took the check to ABC Bank.F) A) and D)
G) B) and C)

Question 9

When it is not possible to determine the status of the signer of an instrument,which of the following is the general rule?

Accepted Answer

A)  The party is considered the drawer.
B)  The party is considered the endorser.
C)  The party is considered the maker.
D)  The party is considered the acceptor.
E)  The party is considered an accommodation party.F) C) and D)
G) All of the above B

Question 10

The only acceptable method of ratification is for the principal to explicitly approve the signature of the unauthorized agent.

Accepted Answer

A) True 
 B)False

Question 11

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'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.
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 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.
D)  The judge is likely to rule that Floyd's only option for recovery is against Rahul who may then recover against Hema.
E)  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.F) A) and B)
G) B) and E)

Question 12

[Diamond Debacle] Prida owns Prida's Jewelry Store.Charla is Prida's top diamond purchasing agent and usually signs promissory notes on Prida's behalf.Unbeknownst to Prida,Charla is considering opening her own diamond business.While at a convention in New York,Charla signs a promissory note with Jirah's Diamonds for the cost of several newly cut stones.Although Prida's Jewelry Store's name does not appear on the note,Jirah is aware that Charla works for Prida's.Charla decides not to quit her job at Prida's and Jirah presents Prida's with the note and demands payment.
-Can Prida's Jewelry be held liable for the note?

Accepted Answer

A)  No,because Charla intended to quit her job at Prida's.
B)  No,because Charla did not write "as an agent of Prida's" on the note.
C)  Yes,if Charla signed the note truly on behalf of Prida's,then Prida's can be held liable even if not identified on the note.
D)  No,because Prida's name must appear on the note in order to be held liable.
E)  Yes,because Jirah knew that Charla worked for Prida's.F) C) and E)
G) A) and C) C

Question 13

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

Accepted Answer

A)  A party's negligence will make the party liable for an unauthorized signature only if the negligence rises to the level of gross negligence.
B)  A party's negligence will make the party liable for an unauthorized signature only if the negligence amounts to a finding of recklessness.
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)  The issue of negligence will not as a matter of law block a party from escaping liability for an unauthorized signature.
E)  Any type of negligence will result in a party being liable for an unauthorized signature.F) A) and E)
G) A) and D)

Question 14

Which of the following circumstances does not discharge a party's liability for a negotiable instrument?

Accepted Answer

A)  Cancelation or renunciation by the holder.
B)  Presentment.
C)  Impairment of collateral.
D)  Payment or tender of payment
E)  Reacquisition.F) A) and C)
G) A) and E)

Question 15

Can Charla be held personally liable for the note?

Accepted Answer

A)  Yes,Charla may be personally liable because Jirah is a holder in due course and was not aware Charla signed on behalf of Prida's.
B)  No,agents can never be personally liable even if the principal's name does not appear on the note.
C)  No because Jirah was a holder in due course.
D)  Yes,agents are personally liable when they sign their own name and omit the name of the principal.
E)  No,Jirah is not a holder in due course and Charla will not be held liable if she can show that it was not Prida's intent to hold Charla personally liable.F) C) and D)
G) A) and E)

Question 16

What is the name of the party that accepts and signs a draft to agree to pay the draft when it is presented?

Accepted Answer

A)  Endorser
B)  Promisor
C)  Acceptor
D)  Maker
E)  DrawerF) None of the above
G) All of the above

Question 17

Which of the following is true regarding how an accommodation party may sign an instrument?

Accepted Answer

A)  An accommodation party may sign an instrument only as an endorser or acceptor.
B)  An accommodation party may sign an instrument only as a maker or acceptor.
C)  An accommodation party may sign an instrument only as a maker.
D)  An accommodation party may sign an instrument as a maker,drawer,acceptor,or endorser.
E)  An accommodation party may sign an instrument only as a maker or a drawer.F) All of the above
G) A) and B)

Question 18

Zachary,who has been authorized to write a check from a company account to pay employees,draws bonus checks from the company account for five fictitious employees,endorses the checks in their names,and deposits those into his own bank account.Which of the following is true regarding whether the company will be required to take the loss on the checks?

Accepted Answer

A)  Under the employee-liability rule,in addition to its rights in regard to Zachary,the company will be able to recover from any bank that cashed the checks.
B)  Under the banking liability act,in addition to its rights in regard to Zachary,the company will be able to recover from any bank that cashed the checks.
C)  Under the transferor rule,the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
D)  Under the fictitious payee rule,the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
E)  Under the imposter rule,the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.F) A) and E)
G) C) and D)

Question 19

Assuming that Rohan admits the modification but it is not considered fraudulent,which of the following is true regarding Taylor's liability on the note?

Accepted Answer

A)  Taylor is liable for $3,000 regardless of whether or not Rohan has negotiated the note to another party.
B)  Taylor's obligation will be enforced only to the amount of $3,000 if payment is to be made to Rohan;but in the event the note is negotiated to another holder,Taylor is liable for $3,500.
C)  Taylor's obligation will be enforced only to the amount of $3,000 if payment is to be made to Rohan;but in the event the note is negotiated to a holder in due course,Taylor is liable for $3,500.
D)  Because of the alteration,Taylor is not liable for any amounts under the promissory note.
E)  Unless Taylor has a written document from Rohan to the effect that the agreement was for $3,000 only,Taylor and Rohan will be legally required to split the remainder with Taylor being held responsible for $3,250.F) C) and D)
G) A) and B)

Question 20

[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 true regarding when,and if,the note was initially dishonored?

Accepted Answer

A)  Hema initially dishonored the instrument when she asked for proper identification.
B)  The note was not dishonored until Anne told Floyd that he would have to seek recovery from Rahul.
C)  Hema initially dishonored the instrument when she refused to pay it on the basis that she lacked funds with which to do so.
D)  The note was considered initially dishonored 30 days after Floyd started seeking Rahul,but was unable to find him.
E)  The note has never been dishonored because Floyd's right to receive payment on the note from someone is acknowledged.F) B) and E)
G) A) and D)

Exam 28: Liability, defenses, and Discharge

For a holder to turn to secondarily liable parties,what are the requirements?

Correct Answer
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Which of the following must occur for a drawer to become liable on a check?

Correct Answer
verified

If Charla was not authorized to sign the note on behalf of Prida,but Prida subsequently accepted the cut diamonds to sell in her store,which of the following terms best describes the situation?

Correct Answer
verified

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 Answer
verified

Which of the following is true about real defenses and personal defenses to liability for negotiable instruments?

Correct Answer
verified

A party who is primarily liable for an instrument must pay without resorting to any other party.

Correct Answer
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True

Which kind of party signs an instrument to provide credit for another party that has also signed the instrument?

Correct Answer
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As defined in the UCC,under which of the following circumstances would presentment have occurred?

Correct Answer
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When it is not possible to determine the status of the signer of an instrument,which of the following is the general rule?

Correct Answer
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B

The only acceptable method of ratification is for the principal to explicitly approve the signature of the unauthorized agent.

Correct Answer
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Which of the following is the likely result if Floyd sues Anne,Rahul,and Hema?

Correct Answer
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Correct Answer
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C

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

Correct Answer
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Which of the following circumstances does not discharge a party's liability for a negotiable instrument?

Correct Answer
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Can Charla be held personally liable for the note?

Correct Answer
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What is the name of the party that accepts and signs a draft to agree to pay the draft when it is presented?

Correct Answer
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Which of the following is true regarding how an accommodation party may sign an instrument?

Correct Answer
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Correct Answer
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Assuming that Rohan admits the modification but it is not considered fraudulent,which of the following is true regarding Taylor's liability on the note?

Correct Answer
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Correct Answer
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Exam 28: Liability, defenses, and Discharge

For a holder to turn to secondarily liable parties,what are the requirements?

Correct AnswerverifiedShow Answer

Which of the following must occur for a drawer to become liable on a check?

Correct AnswerverifiedShow Answer

If Charla was not authorized to sign the note on behalf of Prida,but Prida subsequently accepted the cut diamonds to sell in her store,which of the following terms best describes the situation?

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 true about real defenses and personal defenses to liability for negotiable instruments?

Correct AnswerverifiedShow Answer

A party who is primarily liable for an instrument must pay without resorting to any other party.

Correct AnswerverifiedTrue

Which kind of party signs an instrument to provide credit for another party that has also signed the instrument?

Correct AnswerverifiedShow Answer

As defined in the UCC,under which of the following circumstances would presentment have occurred?

Correct AnswerverifiedShow Answer

When it is not possible to determine the status of the signer of an instrument,which of the following is the general rule?

Correct AnswerverifiedB

The only acceptable method of ratification is for the principal to explicitly approve the signature of the unauthorized agent.

Correct AnswerverifiedShow Answer

Which of the following is the likely result if Floyd sues Anne,Rahul,and Hema?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Which of the following circumstances does not discharge a party's liability for a negotiable instrument?

Correct AnswerverifiedShow Answer

Can Charla be held personally liable for the note?

Correct AnswerverifiedShow Answer

What is the name of the party that accepts and signs a draft to agree to pay the draft when it is presented?

Correct AnswerverifiedShow Answer

Which of the following is true regarding how an accommodation party may sign an instrument?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assuming that Rohan admits the modification but it is not considered fraudulent,which of the following is true regarding Taylor's liability on the note?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow 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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True

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B

Correct Answer
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C

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