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Exam 27: Liability Defenses and Dischapterarge

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Question 21

Multiple Choice

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Quint brings a draft drawn on Regional Credit Union and "payable to Silo LLC" to Regional. The credit union stamps "accepted" on the face of the draft, signs it, and dates it. Regional is

A) no longer liable for payment of the draft.
B) secondarily liable for payment of the draft.
C) obligated to pay the draft when it is presented for payment.
D) liable for payment of the draft thirty days after issue.

E) A) and B)
F) A) and C)

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Question 22

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A person cannot be liable for payment on a negotiable instrument on the basis of signature liability unless he or she has signed it personally.

A) True
B) False

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Question 23

Multiple Choice

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Wang obtains a loan from Xi and signs a note for the amount payable to the lender, who indorses the note and negotiates it to Yuri. Zhang acquires the note from Yuri, and subsequently agrees not to sue Wang on the note. This discharges

Because he or she was in the best position to prevent wrongdoing with respect to an instrument, transfer and presentment warranties attempt to shift liability to

Qato forges Rush's name as the drawer of a stolen check, drawn on Scrutiny Bank, makes the item payable to Qato, and deposits it in his own Scrutiny account. In response to a call from the bank, Rush ratifies the signature. In this situation, Rush is liable to pay the amount to

The lack or failure of consideration is a personal defense and can be used to avoid payment to an ordinary holder, an HDC, and a holder through an HDC.

Transfer of a note "payable to the order of Credit Company" by delivery to Debit Associates, with the payee's indorsement, for consideration, extends warranty liability

What renders a note negotiable is the maker's unconditional promise to pay even if the note is incomplete at the time the maker signs it.

When a person forges an instrument, the person whose name is forged is not liable to an ordinary holder but must pay any HDC the value of the instrument.

The proper presentment of a negotiable instrument for payment can be made only by commercially reasonable written or electronic means.

Lon is Mill Corporation's agent and is authorized to write checks on the firm's account in North Bank. Lon writes a check "pay to the order of Ocean Shipping." Lon signs the check "Mill Corporation by Lon, agent." The bank dishonors the check. Liability extends to

To buy a truck under warranty from Detour Motors, Eli, a consumer, signs a note payable to the dealer. The note includes the notice required by FTC Rule 433. The dealer sells the note to Finance Company, which takes it in good faith, for value, and unaware of any defenses against payment. Eli discovers that the truck is defective and returns it to Detour Motors. The consumer can assert the breach of warranty to avoid payment on the note against

Because banks rely on transfer warranties in the check-collection process, these warranties cannot be disclaimed with regard to checks.

Bravo co-signs a $15,000 note payable to College Loan Company enabling Dios to obtain a student loan. The terms of the note stated that Bravo signed "on behalf of" Dios. If Dios stops making payments on the debt, Bravo is

Like secondary signature liability, warranty liability is subject to the conditions of proper presentment, dishonor, and notice of dishonor.

Housewares Inc. warrants its goods to be free of defects. Ivy issues an instrument to Housewares for the purchase of an appliance that proves to be defective. With respect to payment on the instrument, Ivy

A holder can impair the value of collateral given to secure payment of an instrument without affecting the liability of parties who would benefit from the collateral in the event of nonpayment.

A demand instrument must be presented for acceptance or payment within a reasonable time after its date of issue and before a secondary party becomes liable on it.

Liam, who is authorized to draw checks on Manufacturing Company's account, signs a check preprinted with the company's name with a signature that reads simply, "Liam." On this check, Liam is

Eton executes a preprinted promissory note to First Bank without filling in the due date. The bank does not complete the form by adding the date. The note is