Question 1

A promise that states an express condition to payment is negotiable if the condition is stated in writing on the instrument.

Accepted Answer

A) True 
 B)False

Question 2

A consumer who signs a note to buy a defective product continues to be liable on the note to an HDC even if the consumer returns the faulty product to the seller.

Accepted Answer

A) True 
 B)False

Question 3

To be negotiable, if an instrument is not payable on demand, it must be payable at a definite time.

Accepted Answer

A) True 
 B)False

Question 4

If an instrument is acquired as part of a corporate purchase of assets, the holder will have only the rights of an ordinary holder.

Accepted Answer

A) True 
 B)False

Question 5

Len makes a gift of a check to Millie who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Millie is

Accepted Answer

A)   an acceptor.
B)   a good faith purchaser.
C)   an ordinary holder.
D)   an ordinary holder in due course.E) C) and D)
F) None of the above

Question 6

A difference between the handwriting in the body of a check and in the signature affects the validity of the item and will bar a holder from HDC status.

Accepted Answer

A) True 
 B)False

Question 7

Oliver signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is

Accepted Answer

A)   negotiable.
B)   nonnegotiable, because banks cannot easily process commodities.
C)   nonnegotiable, because it includes the specific date of a contract.
D)   nonnegotiable, because it refers to an express contract.E) A) and B)
F) A) and C)

Question 8

If the numerical and written amounts on a check differ, the check is payable in the written amount.

Accepted Answer

A) True 
 B)False

Question 9

A check "payable to the order of Bethany" is indorsed in blank if Bethany simply delivers it without signing it.

Accepted Answer

A) True 
 B)False

Question 10

Negotiating bearer instruments requires both indorsement and delivery because the use of bearer instruments involves more risk through loss or theft.

Accepted Answer

A) True 
 B)False

Question 11

Ana signs a check payable to Boz, who indorses the back, gives it to Credit Union, and receives cash. The transfer of the check from Boz to Credit Union is

Accepted Answer

A)   an assignment.
B)   a negotiation.
C)   a payment.
D)   a sale.E) All of the above
F) B) and D)

Question 12

In the event that there is a conflicting, superior claim to an instrument, a holder in due course will not be able to collect payment.

Accepted Answer

A) True 
 B)False

Question 13

Rubin writes a check drawn on his account at Clearwater Bank and payable to the order of Gwyn. The bank does not pay the check. Rubin is

Accepted Answer

A)   absolved of liability on the check.
B)   liable to Gwyn for the amount of the check.
C)   liable to the bank for the amount of the check.
D)   entitled to payment of the amount of the check from Gwyn.E) C) and D)
F) A) and B)

Question 14

Oren signs an instrument payable to the order of Pay-Out Loans, Inc., "on or before" June 15. This instrument is

Accepted Answer

A)   negotiable.
B)   nonnegotiable, because the maker can move up the payment date.
C)   nonnegotiable, because moving up the payment date is optional.
D)   nonnegotiable, because the exact payment date cannot be determined from the face of the instrument.E) None of the above
F) C) and D)

Question 15

A person can sign an instrument as an authorized agent of the drawer, but the instrument is not negotiable unless the drawer also signs it.

Accepted Answer

A) True 
 B)False

Question 16

Colin signs a note "payable to the order of Debit Bank." The bank indorses the note in blank and negotiates it to Equity Funds, which sells it to Financial Investments. Liability associated with the transfer of the note from Equity to Financial is

Accepted Answer

A)   none of the choices.
B)   contractual.
C)   signature.
D)   warranty.E) A) and B)
F) B) and C)

Question 17

Duke signs a note "payable to the order of Equity Bank." Unless Duke has a valid defense against payment, his liability on this note is

Accepted Answer

A)   impaired.
B)   primary.
C)   secondary.
D)   qualified.E) A) and C)
F) A) and B)

Question 18

On the back of a check payable to Nero, he writes "Pay to Odell, without recourse" and signs it. This

Accepted Answer

A)   does not effect the check's negotiability or any party's liability.
B)   relieves Nero of liability on the check.
C)   relieves Odell of liability on the check.
D)   renders the check nonnegotiable.E) B) and C)
F) B) and D)

Question 19

Only the payee's bank can acquire the rights of a holder and negotiate a check indorsed by the payee "For deposit only."

Accepted Answer

A) True 
 B)False

Question 20

A note made in exchange for funds that contains an acceleration clause is not negotiable because the exact value of the note cannot be ascertained.

Accepted Answer

A) True 
 B)False

Exam 22: Negotiable Instruments

Ana signs a check payable to Boz, who indorses the back, gives it to Credit Union, and receives cash. The transfer of the check from Boz to Credit Union is

Correct AnswerverifiedShow Answer

Colin signs a note "payable to the order of Debit Bank." The bank indorses the note in blank and negotiates it to Equity Funds, which sells it to Financial Investments. Liability associated with the transfer of the note from Equity to Financial is

Correct AnswerverifiedShow Answer

Duke signs a note "payable to the order of Equity Bank." Unless Duke has a valid defense against payment, his liability on this note is

Correct AnswerverifiedShow Answer

A note made in exchange for funds that contains an acceleration clause is not negotiable because the exact value of the note cannot be ascertained.

Correct AnswerverifiedShow Answer

Len makes a gift of a check to Millie who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Millie is

Correct AnswerverifiedShow Answer

A promise that states an express condition to payment is negotiable if the condition is stated in writing on the instrument.

Correct AnswerverifiedShow Answer

Only the payee's bank can acquire the rights of a holder and negotiate a check indorsed by the payee "For deposit only."

Correct AnswerverifiedShow Answer

In the event that there is a conflicting, superior claim to an instrument, a holder in due course will not be able to collect payment.

Correct AnswerverifiedShow Answer

To be negotiable, if an instrument is not payable on demand, it must be payable at a definite time.

Correct AnswerverifiedShow Answer

Negotiating bearer instruments requires both indorsement and delivery because the use of bearer instruments involves more risk through loss or theft.

Correct AnswerverifiedShow Answer

A check "payable to the order of Bethany" is indorsed in blank if Bethany simply delivers it without signing it.

Correct AnswerverifiedShow Answer

A difference between the handwriting in the body of a check and in the signature affects the validity of the item and will bar a holder from HDC status.

Correct AnswerverifiedShow Answer

Oren signs an instrument payable to the order of Pay-Out Loans, Inc., "on or before" June 15. This instrument is

Correct AnswerverifiedShow Answer

Rubin writes a check drawn on his account at Clearwater Bank and payable to the order of Gwyn. The bank does not pay the check. Rubin is

Correct AnswerverifiedShow Answer

If the numerical and written amounts on a check differ, the check is payable in the written amount.

Correct AnswerverifiedShow Answer

If an instrument is acquired as part of a corporate purchase of assets, the holder will have only the rights of an ordinary holder.

Correct AnswerverifiedShow Answer

Oliver signs an instrument that states it is being executed "as per a contract for the sale of a case of apples dated May 1." This instrument is

Correct AnswerverifiedShow Answer

On the back of a check payable to Nero, he writes "Pay to Odell, without recourse" and signs it. This

Correct AnswerverifiedShow Answer

A consumer who signs a note to buy a defective product continues to be liable on the note to an HDC even if the consumer returns the faulty product to the seller.

Correct AnswerverifiedShow Answer

A person can sign an instrument as an authorized agent of the drawer, but the instrument is not negotiable unless the drawer also signs it.

Correct AnswerverifiedShow Answer

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