Deck 25: Liability and Discharge

Question 1

Both signers and non-signers of instruments may be liable on the instrument.

Answer 1

True

Question 2

Warranty liability is based on a party's signature on the paper.

Answer 2

False

Question 3

One of the transfer warranties is that all signatures on the instrument are authentic and authorized.

Answer 3

True

Question 4

Two parties are primarily liable: the drawer and the indorser.

Question 5

When acceptance or payment is refused after presentment, the instrument is said to be dishonored.

Question 6

If presentment is delayed, the drawer may be discharged to the extent the delay caused the drawer a loss.

Question 7

Agents are discouraged from signing instruments on behalf of their principals.

Question 8

For an unaccepted draft, the drawer's liability is conditioned on presentment.

Question 9

Authorized signatures are not binding if negligence contributed to an instrument's alteration or forgery,

Question 10

An accommodation maker is not primarily liable on a note.

Question 11

Liability can also arise by warranty.

Question 12

Unlike primary liability, secondary liability is conditional, arising only if the primarily liable party fails to pay.

Question 13

Bank returns a check for lack of a necessary indorsement; the check has been dishonored.

Question 14

Presentment cannot be excused even if the maker or executor is dead.

Question 15

For contract liability purposes, signing parties are divided into two categories: primary parties and secondary parties.

Question 16

Conversion is the civil equivalent of theft.

Question 17

A person who has no authority to sign an instrument cannot really be an "agent".

Question 18

For an indorser, the condition for liability in general is notice of dishonor excused.

Question 19

According to the Uniform Commercial Code, a signature must be signed; it cannot be made by means of a device or machine.

Question 20

Presentment warranties are given by the presenter to the maker or drawer of an instrument.

Question 21

There are some deadlines for giving notice: on an instrument taken for collection:

A) a nonbank must give notice before midnight on the next banking day following the day on which it receives notice of dishonor.
B) a bank must give notice within thirty days after the day it received notice.
C) in all situations, the deadline is ninety days after the day dishonor occurred.
D) a specific form of notice is required to be given in written communication.
E) may be given by any commercially reasonable means including a written, or electronic communication, but excluding all oral communication.

Question 22

Which of the following is true about the liability of an agent who has the authority to sign?

A) Under agency law, the principal would be bound by the act of the agent, if the signature is the authorized signature of the principal
B) An authorized signature may be ratified by the principal.
C) A negligent person can assert lack of authority against a holder in due cause.
D) Authorized signatures are not binding.
E) The general rule in agency law is that the agent is liable if he signs his own name making clear he is doing so as an agent.

Question 23

The common-law tort that makes a person who wrongfully takes another's property liable for that taking is_____.

A) bankruptcy
B) presentment
C) acceptance
D) forgery
E) conversion

Question 24

Which of the following is a condition for liability in general?

A) Presentment waived
B) Unaccepted draft
C) Notice of dishonor excused
D) Warranty liability
E) Transfer of warranty

Question 25

The PNC Bank v. Robert L. Martin case is about _____.

A) warranty liability
B) breach of transfer warranties
C) notice of dishonor excused
D) indorser's liability
E) liability of primary parties

Question 26

Under _____, the holder may discharge any party, even without consideration, by marking the face of the instrument or the indorsement in an unequivocal way.

A) discharge by payment
B) discharge by tender
C) discharge by cancellation and renunciation
D) material and fraudulent alteration
E) discharge of indorsers and accommodation parties

Question 27

_____ generally means failure by the obligor to pay on the instrument when presentment for payment is made.

A) Conversion
B) Dishonor
C) Bankruptcy
D) Forgery
E) Presentment

Question 28

Which of the following parties is primarily liable?

A) Carrier
B) Holder
C) Maker of a note
D) Factor
E) Indorser

Question 29

Apple seeks to compel the bank to credit his account for the loss. Will he prevail?

Question 30

How is the acceptor one of the parties that is primarily liable?

Question 31

Which of the following is a warranty made one who presents an unaccepted draft?

A) The transferor is not entitled to enforce the instrument.
B) All signatures on the instrument are not authentic or authorized.
C) The instrument has been altered.
D) Entitled to enforce the draft or to obtain payment or acceptance.
E) The presenter has knowledge that the signature of the drawer is unauthorized.

Question 32

Under what conditions is presentment waived or excused?

Question 33

Notice of dishonor is not required if:

A) the drawer instructed the drawee not to pay or accept.
B) the drawee was not obligated to the drawer to pay the draft.
C) by the instrument's terms no presentment is necessary.
D) the creditor cannot with reasonable diligence present the instrument.
E) the debtor waived the notice of dishonor.

Question 34

A drawee bank that pays over a forged indorsement is not liable for conversion.

Question 35

A person acting (or purporting to act) as an agent who signs an instrument:

A) is liable if he signs his name without indicating agency status but the check has the principal's identification on it.
B) is not required to be the authorized signature of the principal.
C) is liable if he signs his own name and makes clear he is doing so as an agent.
D) binds the principal to the same extent as the principal would be bound if the signature were on a simple contract.
E) is not liable when he signs incorrectly.

Question 36

Acceptance of a draft by a bank discharges prior and subsequent indorsers.

Question 37

According to the Uniform Commercial Code, _____ occurs when a person entitled to enforce the instrument (creditor) demands payment from the maker.

A) acceptance
B) conversion
C) presentment
D) dishonor
E) discharge

Question 38

Unlike primary liability, secondary liability is conditional, arising only if the primarily liable party fails to pay. To which of the following parties does this condition apply?

A) Forgers
B) Warehousers
C) Acceptors
D) Makers
E) Indorsers

Question 39

Which of the following statements ties to the 'maker' as the party that is primarily liable?

A) Indorsers may disclaim contractual liability by indorsing "without recourse".
B) The drawer of a non-check draft may disclaim her contractual liability on the instrument by drawing "without recourse".
C) If the drawee varies the terms when accepting the draft, it is liable according to the terms as varied.
D) The obligation is owed to a person entitled to enforce the note or to an indorser that paid the note.
E) An unauthorized signature may be ratified by the principal.

Question 40

Which of the following is true about conditions under which presentment is waived or excused?

A) If the creditor cannot with reasonable diligence present the instrument
B) If the instrument's terms require it
C) If the debtor waived the notice of dishonor
D) If the drawee instructed the drawer not to pay or accept
E) If the drawer was not obligated to the drawee to pay the draft

Question 41

The facts are the same as above, but you are to assume that the bank discovered the forgery before returning the check to Apple and therefore credited his account. Can the bank in turn collect from Dubious the $1,500 paid to Dubious?

Question 42

Would your answer to 1 and 2 above be different if the forged signature were that of the payee or an indorser rather than the signature of the drawer?