Question 1

Of the following roles that persons who sign a negotiable instrument can play,which do not have signature liability on the instrument?

Accepted Answer

Qualified indorsers and those signing properly as an authorized agent do not have signature liability on the instrument. Accommodation signers and authorized signers may incur signature liability. Therefore, option A is incorrect. Option C includes authorized signers, who may incur signature liability, and option D includes accommodation signers, who may also incur signature liability. Option E is not correct because some parties may sign an instrument without incurring signature liability, such as qualified indorsers and authorized agents.

Question 2

Breach of contract is a real defense.

Accepted Answer

A breach of contract is a personal defense, not a real defense, as it pertains to the specific parties involved in the contract rather than being universally applicable.

Question 3

Someone can have warranty liability on an instrument without having signed it.

Accepted Answer

Warranty liability can arise from various sources such as implied warranties, federal or state law, or even company policies. Signing an instrument, such as a contract or warranty agreement, is not always necessary for a party to be liable for warranty claims.

Question 4

Cancellation of a negotiable instrument will discharge any party with primary liability as well as any party with secondary liability.

Accepted Answer

Cancellation of a negotiable instrument discharges all parties from their obligations, including those with primary and secondary liability, as it nullifies the instrument's enforceability.

Question 5

Which of the following is true about primary liability on a check?

Accepted Answer

The answer of Which of the following is true about...

Question 6

A maker's discharge in bankruptcy is considered to be a real defense.

Accepted Answer

A maker's discharge in bankruptcy means that they have been legally released from the obligation to repay their debts. This discharge is recognized as a defense against any attempts to collect on the debt after the bankruptcy has been granted.

Question 7

A special form of appointment is necessary in order to grant an agent authority to sign an instrument.

Accepted Answer

The answer of A special form of appointment is necessary...

Question 8

Transferors cannot be held liable for breaching implied warranties when negotiating instruments.

Accepted Answer

Transferors can be held liable for breaching implied warranties such as that the instrument is genuine, free from material alteration, and has not been previously dishonored. However, the extent of their liability may vary depending on the type of instrument and the relationship between the transferor and transferee.

Question 9

Andy Anderson is an agent for Peterson Corporation,whose name does not appear on its checks.If Andy signs a check as the drawer,for which of the following signatures could Andy be personally liable on the instrument?

Accepted Answer

The answer of Andy Anderson is an agent for Peterson...

Question 10

The fact that the Federal Trade Commission has eliminated holder in due course status in connection with consumer credit transactions is a disadvantage for consumers.

Accepted Answer

The elimination of holder in due course status in consumer credit transactions is actually an advantage for consumers, as it allows them to assert defenses against third-party holders of their debt, protecting them from unfair practices.

Question 11

Personal defenses are effective against all holders,whether or not the holder is a holder in due course.

Accepted Answer

The answer of Personal defenses are effective against all holders,whether...

Question 12

A principal will be held liable for ratifying an agent's unauthorized signature.

Accepted Answer

When a principal ratifies an agent's unauthorized signature, they essentially give their approval and acceptance of the agent's actions. As a result, the principal will be held liable for any consequences that arise from that agent's actions, including any contractual obligations or legal issues.

Question 13

The accommodation indorser is primarily liable on the instrument.

Accepted Answer

An accommodation indorser is secondarily liable, as they guarantee payment if the primary party defaults.

Question 14

Any passage of an instrument other than its issuance and presentment for payment is considered a transfer.

Accepted Answer

Any transfer of an instrument, such as by endorsement or negotiation, is considered a transfer. Issuance and presentment for payment are not considered transfers.

Question 15

Which of the following applies to signers when determining signature liability?

Accepted Answer

The answer of Which of the following applies to signers...

Question 16

Fraud in the inception occurs when a party is tricked into signing a negotiable instrument while thinking he/she is signing something else.

Accepted Answer

Fraud in the inception, also known as fraud in the factum, involves deception related to the very nature of the transaction. It occurs when a person is misled into signing a contract, a negotiable instrument, or a legal document without understanding its nature, character or essential terms. This type of fraud vitiates the entire agreement and renders it void from the outset.

Question 17

What is needed for a party to be considered secondarily liable on an instrument?

Accepted Answer

All of the options listed are necessary for a party to be considered secondarily liable on an instrument. The instrument must be properly presented for payment, it must be dishonored, the notice of dishonor must be timely, and it must be given to the person to be held secondarily liable. Therefore, option E is the correct choice.

Question 18

Signature liability on a negotiable instrument is also known as:

Accepted Answer

The answer of Signature liability on a negotiable instrument is...

Question 19

When does acceptance of a draft occur?

Accepted Answer

Acceptance of a draft occurs when the drawee writes the word acceptance across the face of the draft. Accommodation and unqualified indorser are not necessarily required for acceptance to occur.

Question 20

Which of the following is true?

Accepted Answer

The answer of Which of the following is true?
...

Quiz 24: Liability,Defenses and Discharge