Question 1

Discharge means that

Accepted Answer

A)   someone has stolen an instrument.
B)   an obligor refuses to pay an instrument that is due.
C)   liability on an instrument terminates.
D)   a bank has paid a check that has a forged indorsement.

Question 2

Which of the following will discharge an instrument?

Accepted Answer

A)   John asks Bev, an employee, to take money to the bank to pay off a note, but she keeps the money instead.
B)   Two people make an oral agreement to discharge.
C)   Chet accidentally leaves a check in his pocket and it is destroyed in the washing machine.
D)   The terms of the instrument are intentionally changed.

Question 3

Check kiting is defined as

Accepted Answer

A)   indorsing a check while knowing that the check is a stolen check.
B)   carelessly paying an unauthorized instrument.
C)   a scheme of overdrawing account "A" by depositing a check in account "B," then overdrawing account "B" to cover the insufficient funds in account "A."
D)   issuing an instrument to an impostor who negotiates the instrument to a bank that is unaware of the fraud.

Question 4

Anyone who presents a check for payment makes certain warranties. Which of the following is NOT one of those warranties?

Accepted Answer

A)   that he or she is a holder
B)   that the check has not been altered
C)   that the drawee is a solvent institution
D)   that all signatures are authentic

Question 5

Paula is a sales agent for The Rock Insurance Company. Paula accepts a check from a customer made payable to her in payment for the premium on an insurance policy. Prior to depositing the check in The Rock's bank account, Paula indorses the check as follows: "The Rock Insurance Company, by Paula Beck, agent." Assuming that Paula has authority to indorse company checks, if the check is dishonored, then between Paula, The Rock, and the bank

Accepted Answer

A)   Paula only will be liable.
B)   Paula and The Rock will be liable.
C)   The Rock only will be liable.
D)   The bank will be stuck with the dishonored check.

Question 6

Conversion means that someone has stolen an instrument or a bank has paid a check that has a forged indorsement.

Accepted Answer

A) True 
 B)False

Question 7

Warranty liability is the liability of someone who gives payment on a negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 8

Tom indorsed a check made payable to the order of Tom Jones as follows: Pay Raymond Berry
/s/ Tom Jones
Raymond negotiated the check to his landlord for his rent. Raymond indorsed the check as follows:
Without Recourse
/s/ Raymond Berry
With regard to Tom's indorsement, which statement is correct?

Accepted Answer

A)   Tom has secondary contractual liability on the check as an indorser.
B)   Tom has no contractual liability on the check because he is the payee.
C)   Tom has primary contractual liability on the check as payee.
D)   Tom eliminated his liability as an indorser by the type of indorsement he used.

Question 9

List and explain the five different ways to discharge an instrument according to Article 3 of the UCC.

Accepted Answer

By payment: Payment discharges an instru...

Question 10

Nelson writes Leah a check for mowing his lawn. Leah deposits the check in her bank, but it is not paid by Nelson's bank. Leah calls Nelson to notify him that her bank returned his check to her unpaid. Leah's notice of the dishonor is insufficient; she must provide written notice.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following parties has primary liability on a draft?

Accepted Answer

A)   the drawee
B)   the maker
C)   the drawer
D)   the indorser

Question 12

Negotiable instruments are normally issued to fulfill a contract.

Accepted Answer

A) True 
 B)False

Question 13

When a negotiable instrument is transferred, the transferor warrants all of the following EXCEPT

Accepted Answer

A)   the instrument is bearer paper.
B)   all signatures are authentic.
C)   as far as she knows the issuer is solvent.
D)   the instrument has not been altered.

Question 14

Under the UCC, all of the following have the right to enforce payment of an instrument EXCEPT

Accepted Answer

A)   a holder of the instrument.
B)   anyone to whom the shelter rule applies.
C)   a holder who has lost the instrument.
D)   a holder who intentionally destroys the instrument..

Question 15

Jessie is the maker of a $1,000 promissory note in favor of Tyler. Tyler subsequently indorses the note to Ryan by signing just his name. Ryan in turn indorses it to Breanna by indorsing the back of the note, "Without recourse, Ryan." Breanna then indorses it to Liz, the present holder, with a special indorsement. If the note is dishonored by Jessie after it is properly presented to her for payment by Liz, then Liz, after giving timely notice to Tyler, Ryan, and Breanna, may collect payment under signature liability from

Accepted Answer

A)   Tyler only.
B)   Breanna and Tyler only.
C)   either Tyler, Ryan, or Breanna.
D)   neither Tyler, Ryan, nor Breanna.

Question 16

What term is used to indicate the passing on of an instrument that one knows to be forged?

Accepted Answer

A)   discharge
B)   utter
C)   kite
D)   bounce

Question 17

Generally, indorsers are not liable under signature liability if

Accepted Answer

A)   they write the words "without recourse" next to their signatures on the instrument.
B)   they are not the drawee.
C)   a check is presented for payment within 30 days after the indorsement.
D)   they are an accommodation party.

Question 18

Which of the following is NOT one of the five ways to discharge a negotiable instrument?

Accepted Answer

A)   payment
B)   cancellation
C)   alteration
D)   presentation

Question 19

A check was indorsed as follows: Jessica Hall
Without recourse
Paul Samuels
Collection guaranteed
Melissa Liston
Which of the following will discharge all of the indorsers?

Accepted Answer

A)   notice of dishonor after 30 days' time
B)   the "without recourse" indorsement within the chain
C)   insolvency of drawer
D)   certification of the check

Question 20

Ivy wants to buy a necklace from Bethany for $500 and offers to write a check. To protect herself, Bethany insists that Ivy give her a certified check. If Ivy does this, who then becomes primarily liable?

Accepted Answer

A)   Bethany
B)   the bank
C)   Ivy
D)   both Ivy and the bank

Exam 26: Liability for Negotiable Instruments

When a negotiable instrument is transferred, the transferor warrants all of the following EXCEPT

Correct Answer
verified

Conversion means that someone has stolen an instrument or a bank has paid a check that has a forged indorsement.

Correct Answer
verified

Under the UCC, all of the following have the right to enforce payment of an instrument EXCEPT

Correct Answer
verified

A check was indorsed as follows: Jessica Hall Without recourse Paul Samuels Collection guaranteed Melissa Liston Which of the following will discharge all of the indorsers?

Correct Answer
verified

List and explain the five different ways to discharge an instrument according to Article 3 of the UCC.

Correct Answer
verified
By payment: Payment discharges an instru...
View Answer

Which of the following is NOT one of the five ways to discharge a negotiable instrument?

Correct Answer
verified

Check kiting is defined as

Correct Answer
verified

Generally, indorsers are not liable under signature liability if

Correct Answer
verified

Which of the following will discharge an instrument?

Correct Answer
verified

Anyone who presents a check for payment makes certain warranties. Which of the following is NOT one of those warranties?

Correct Answer
verified

Which of the following parties has primary liability on a draft?

Correct Answer
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What term is used to indicate the passing on of an instrument that one knows to be forged?

Correct Answer
verified

Correct Answer
verified

Ivy wants to buy a necklace from Bethany for $500 and offers to write a check. To protect herself, Bethany insists that Ivy give her a certified check. If Ivy does this, who then becomes primarily liable?

Correct Answer
verified

Tom indorsed a check made payable to the order of Tom Jones as follows: Pay Raymond Berry /s/ Tom Jones Raymond negotiated the check to his landlord for his rent. Raymond indorsed the check as follows: Without Recourse /s/ Raymond Berry With regard to Tom's indorsement, which statement is correct?

Correct Answer
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Warranty liability is the liability of someone who gives payment on a negotiable instrument.

Correct Answer
verified

Correct Answer
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Discharge means that

Correct Answer
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Negotiable instruments are normally issued to fulfill a contract.

Correct Answer
verified

Nelson writes Leah a check for mowing his lawn. Leah deposits the check in her bank, but it is not paid by Nelson's bank. Leah calls Nelson to notify him that her bank returned his check to her unpaid. Leah's notice of the dishonor is insufficient; she must provide written notice.

Correct Answer
verified

Exam 26: Liability for Negotiable Instruments

When a negotiable instrument is transferred, the transferor warrants all of the following EXCEPT

Correct AnswerverifiedShow Answer

Conversion means that someone has stolen an instrument or a bank has paid a check that has a forged indorsement.

Correct AnswerverifiedShow Answer

Under the UCC, all of the following have the right to enforce payment of an instrument EXCEPT

Correct AnswerverifiedShow Answer

A check was indorsed as follows: Jessica Hall Without recourse Paul Samuels Collection guaranteed Melissa Liston Which of the following will discharge all of the indorsers?

Correct AnswerverifiedShow Answer

List and explain the five different ways to discharge an instrument according to Article 3 of the UCC.

Correct AnswerverifiedBy payment: Payment discharges an instru...View AnswerShow Answer

Which of the following is NOT one of the five ways to discharge a negotiable instrument?

Correct AnswerverifiedShow Answer

Check kiting is defined as

Correct AnswerverifiedShow Answer

Generally, indorsers are not liable under signature liability if

Correct AnswerverifiedShow Answer

Which of the following will discharge an instrument?

Correct AnswerverifiedShow Answer

Anyone who presents a check for payment makes certain warranties. Which of the following is NOT one of those warranties?

Correct AnswerverifiedShow Answer

Which of the following parties has primary liability on a draft?

Correct AnswerverifiedShow Answer

What term is used to indicate the passing on of an instrument that one knows to be forged?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ivy wants to buy a necklace from Bethany for $500 and offers to write a check. To protect herself, Bethany insists that Ivy give her a certified check. If Ivy does this, who then becomes primarily liable?

Correct AnswerverifiedShow Answer

Tom indorsed a check made payable to the order of Tom Jones as follows: Pay Raymond Berry /s/ Tom Jones Raymond negotiated the check to his landlord for his rent. Raymond indorsed the check as follows: Without Recourse /s/ Raymond Berry With regard to Tom's indorsement, which statement is correct?

Correct AnswerverifiedShow Answer

Warranty liability is the liability of someone who gives payment on a negotiable instrument.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Discharge means that

Correct AnswerverifiedShow Answer

Negotiable instruments are normally issued to fulfill a contract.

Correct AnswerverifiedShow Answer

Nelson writes Leah a check for mowing his lawn. Leah deposits the check in her bank, but it is not paid by Nelson's bank. Leah calls Nelson to notify him that her bank returned his check to her unpaid. Leah's notice of the dishonor is insufficient; she must provide written notice.

Correct AnswerverifiedShow Answer

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By payment: Payment discharges an instru...
View Answer

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