Question 1

Mary's mom, Judy, is presented with a check that is signed by Mary. The party presenting the check demands that Judy pay the amount on the check because Judy is Mary's mom. Article 3 of the UCC indicates that Judy would have to pay the amount of the check.

Accepted Answer

Under Article 3 of the UCC, being a relative of the signer does not make one liable for a check. Liability is generally limited to the parties who have signed the instrument (e.g., the maker or endorser) unless specific conditions are met that would extend liability to others.

Question 2

The UCC allows a signature to be any mark affixed to the instrument with the intention to authenticate a writing.

Accepted Answer

The Uniform Commercial Code (UCC) is flexible regarding what constitutes a signature, recognizing any mark made with the intent to authenticate a document as a valid signature.

Question 3

Secondary liability arises only when the primary party fails to pay on the negotiable instrument.

Accepted Answer

Secondary liability on a negotiable instrument arises when the primary party, such as the maker or acceptor, fails to fulfill their obligation to pay.

Question 4

An instrument can be presented within any time period and in any manner to be eligible for payment.

Accepted Answer

An instrument must be presented for payment within the time frame and in the manner specified by the terms of the instrument and applicable laws to be eligible for payment. Failure to do so may discharge the parties liable on the instrument from their obligation to pay.

Question 5

Kevin is the representative of Markus, the principal and therefore, whatever negotiable instruments that Kevin signs will be binding on Markus.

Accepted Answer

The answer of Kevin is the representative of Markus, the...

Question 6

Peter forged Andrew's signature on a check and cashed it draining Andrew's entire bank account. Peter skips town and cannot be located and therefore, the drawee bank will be liable for the forged check.

Accepted Answer

The drawee bank is generally liable for a forged check if it pays out on the check because it is the bank's responsibility to verify the authenticity of the signature against the signature they have on file. If the bank fails to identify the forgery and pays out, it typically bears the loss.

Question 7

A person presenting a check asserts by law that he is the legitimate owner of the check, that the check has not been altered in any way and the presenter has no reason to believe that the drawee's signature is forged.

Accepted Answer

Presenting a check implies a warranty that the presenter is entitled to enforce the check or is authorized to obtain payment on behalf of a person who is entitled, that the check has not been altered, and that the presenter has no knowledge of any forgery of the signature of the drawer. This is based on the principles of the Uniform Commercial Code (UCC) in the United States, which governs commercial transactions including checks.

Question 8

Even though Randal was 16 years old when he signed the check, the court will determine it is a valid instrument because it follows common law rules of contracts.

Accepted Answer

Under the Uniform Commercial Code (UCC), which governs commercial transactions including negotiable instruments like checks, minors (those under 18 in most jurisdictions) generally cannot be held to contracts as they are considered to lack legal capacity. However, there are exceptions and nuances depending on the jurisdiction and the nature of the contract.

Question 9

An instrument can be discharged by a material and fraudulent alteration of the instrument.

Accepted Answer

A material and fraudulent alteration of an instrument can discharge the party whose obligation is affected by the alteration, as it changes the terms of the contract without that party's consent.

Question 10

No discharge of any party operates against a subsequent holder in due course unless he has notice when she takes the instrument.

Accepted Answer

A discharge of any party from the obligation of an instrument does not affect the rights of a holder in due course who takes the instrument without notice of the discharge. A holder in due course takes the instrument for value, in good faith, and without notice of any defect or discharge, and thus their rights in the instrument are protected.

Question 11

Brooke receives a check from Travis which he did not sign. Will Brooke be able to cash it as is?

Accepted Answer

A check must be signed by the drawer (in this case, Travis) to be considered valid and legally binding. Without Travis's signature, the check cannot be cashed or deposited.

Question 12

Larry, the owner of Shoe Industries, employs 100 people. Recently, he broke his hand and therefore, when payday came, he felt he was not able to sign all of the checks and asked his employee, Daryl, to sign the checks. Will these instruments be enforceable?

Accepted Answer

Daryl can sign the checks as an agent of Larry, as long as he has been given the authority to do so.

Question 13

Monica Stewart attempts to write out a check at the local store for the purchase of goods. However, at the time she attempts to sign the check, her children run off and she is only able to sign an "M" but no other letters of her name. Will the store be able to cash the check with only the "M" on it?

Accepted Answer

A signature can indeed be any mark or symbol made with the intent to authenticate a document. According to the Uniform Commercial Code (UCC), there is no specific requirement for a signature to be a full name or to match one's usual handwriting. The key factor is the intent behind the mark.

Question 14

At some point in his career, the musician, Prince, only referred to himself as a symbol and signed all of his checks in that manner rather than his legal name, Prince Rogers Nelson. If he signed a check with the symbol, rather than his legal name, would that check have been enforceable?

Accepted Answer

A signature can indeed be any mark or symbol made with the intention of authenticating a document. The key factor is the intent of the signer to give the document legal effect.

Question 15

Liability for the amount of the instrument as soon as it is issued and required to be paid as soon as the instrument is presented for payment is

Accepted Answer

Primary liability refers to the obligation of the party primarily responsible for the payment of the instrument's face value upon its presentation. This includes issuers of promissory notes or checks, who are obligated to pay the amount specified in the instrument when it is presented for payment.

Question 16

The __________ is the one who signs the check, with the proper authority to sign it and thus becomes liable to when it becomes due.

Accepted Answer

The maker of a check is the individual or entity who signs the check, authorizing the transfer of money from the signer's account. This term specifically applies to the party that creates the obligation to pay, making them liable for the payment when the check is due.

Question 17

August signed a check for $100.00 payable to Whitney on July 1. Whitney forgot to cash the check until July 20. In between that time, August monitored his checking account daily and saw that his balance remained consistently at $120.00. On July 18th, seeing no change in his account, he wrote another check to Elise for $110.00 and she immediately cashed the check. On July 20th, when Whitney attempted to cash August's check for $100.00, the bank would not cash it due to insufficient funds. Which statement below is correct?

Accepted Answer

August remains liable to pay Whitney the amount of the check upon demand because the responsibility to manage funds to cover checks issued falls on the issuer, August, regardless of the order in which the checks were cashed or the timing of such actions.

Question 18

The person who accepts the negotiable instrument and agrees to be primarily responsible for its payment is

Accepted Answer

The drawee is the person or entity upon whom a negotiable instrument is drawn and who is ordered to pay the specified amount. When the drawee accepts the instrument, they become primarily responsible for its payment.

Question 19

In the case, Affiliated Health Group v. Healthcare Services Corp., the court ruled

Accepted Answer

C) The insurer was no longer responsible for the amount of the negotiable instrument because the bank accepted the instrument. This is based on principles of negotiable instruments law, where acceptance by the bank typically discharges the issuer from liability, assuming the transaction was in good faith and without knowledge of any fraud.

Question 20

__________ liability is conditional and arises only if the primarily liable party fails to pay on the negotiable instrument.

Accepted Answer

Secondary liability is conditional and arises only if the primarily liable party, such as the maker of a note or the acceptor of a draft, fails to pay on the negotiable instrument. This type of liability applies to endorsers or guarantors who only become responsible for payment if the primary party defaults.

Quiz 21: Liability, Defenses, and Discharge