Question 1

When the maker of a note promises to repay the note at specific dates over time,it is called an installment note.

Accepted Answer

An installment note specifies a series of payments (installments) that the borrower must make to the lender over time to repay a loan or debt. Each installment includes both interest and principal payments, with the amount and number of installments determined by the terms of the note.

Question 2

In Lor-Mar/Toto v.Constitution Bank,where checks were forged on a company account with a signature that looked like the stamped signature used by Lor-Mar,the court held that the bank was not liable for the checks because the signature looked like the official one.

Accepted Answer

The statement is incorrect. In Lor-Mar/Toto v. Constitution Bank, the court held that the bank was liable for the forged checks because the signature was not a proper authentication of the drawer's identity. The bank should have been more careful in verifying the authenticity of the signature.

Question 3

For a check,the bank is the drawee.

Accepted Answer

The drawee is the party that is ordered to pay the amount specified on the check, which is typically the bank where the account is held. Therefore, for a check, the bank is the drawee.

Question 4

When personal property is used to back up a note,it is called a collateral note.

Accepted Answer

A collateral note is a type of secured note where personal property (such as a car or house) is used as collateral to secure the loan. If the borrower fails to repay the loan, the lender can seize the collateral to recover their funds.

Question 5

Under Article 3 of the UCC,a note is a promise by one party to pay a certain sum of money to another party.Two parties are involved: the maker and the payee.Payment may be set at some time in the future.

Accepted Answer

This statement accurately describes the definition of a note under Article 3 of the UCC.

Question 6

A cashier's check is a form of check in which the bank is both the drawer and the drawee.

Accepted Answer

A cashier's check is drawn on the bank's own funds and the bank itself is responsible for paying the recipient of the check. Therefore, the bank is both the drawer (the one who creates the check) and the drawee (the one who is responsible for paying the check).

Question 7

The drawee owes money to the drawer in a negotiable instrument.

Accepted Answer

In a negotiable instrument, such as a check, the drawee is the one who owes money to the drawer.

Question 8

When real estate is used to back up a note,it is called a collateral note.

Accepted Answer

The answer of When real estate is used to back...

Question 9

A check is a draft drawn on a bank and payable on demand.

Accepted Answer

This is the definition of a check.

Question 10

When the maker of a note promises to repay the note in specific installments over time,it is a balloon note.

Accepted Answer

A balloon note is a type of promissory note where the borrower makes smaller payments during the term of the loan and a large final payment (also called the balloon payment) at the end of the term. It does not involve specific installments over time.

Question 11

In Lor-Mar/Toto v.Constitution Bank,where checks were forged on a company account with a signature that looked like the stamped signature used by Lor-Mar,the court held that the bank was liable to Lor-Mar for negligence for allowing someone to get official check paper from the bank.

Accepted Answer

The court held that the bank was not liable for negligence because the forgeries were facilitated by the company's own lack of internal controls, not by the bank's actions.

Question 12

The party to receive a payment from a negotiable instrument is called the payee.

Accepted Answer

This is the definition of a payee according to negotiable instruments law.

Question 13

A balloon note has one large payment up front then a series of smaller payments over time.

Accepted Answer

A balloon note typically involves making relatively small payments for a set period, followed by a large (or "balloon") payment at the end to pay off the remaining balance.

Question 14

In Lor-Mar/Toto v.Constitution Bank,where checks were forged on a company account with a signature that looked like the stamped signature used by Lor-Mar,the court held that the bank was strictly liable to Lor-Mar for cashing the checks.

Accepted Answer

The court held the bank strictly liable for cashing the checks that were forged on Lor-Mar's company account with a signature that looked like the stamped signature used by Lor-Mar.

Question 15

In Lor-Mar/Toto v.Constitution Bank,where checks were forged on a company account with a signature that looked like the stamped signature used by Lor-Mar,the court held that the bank was not liable for the checks because the signature was stamped,not personal.

Accepted Answer

The answer of In Lor-Mar/Toto v.Constitution Bank,where checks were forged...

Question 16

A note involves two parties,the maker and the payee.Payment must be on demand.

Accepted Answer

A note can specify payment on demand or at a definite time. It does not have to be on demand only.

Question 17

The party who agrees to make a payment to another party,based on a document presented to it,such as a bank,is called the drawer.

Accepted Answer

The party who agrees to make a payment to another party based on a document presented to it is called the drawee, not the drawer. The drawer is the party who creates the document, such as a check or bill of exchange.

Question 18

Under Article 3 of the UCC,a draft is a conditional promise to pay that involves three parties in distinct capacities: drawer,drawee,and payee.

Accepted Answer

The answer of Under Article 3 of the UCC,a draft...

Question 19

The drawer owes money to the drawee in a negotiable instrument.

Accepted Answer

The drawer is the one who issues the negotiable instrument (such as a check or promissory note) and makes the promise to pay, while the drawee is the one who will receive the payment. Therefore, the drawer wouldn't owe money to the drawee in a negotiable instrument.

Question 20

Under Article 3 of the UCC,a check is an unconditional written order to pay that involves three parties in distinct capacities: drawer,drawee,and payee.The drawee must be a bank.Payment must be "on demand."

Accepted Answer

This is a correct statement according to Article 3 of the UCC (Uniform Commercial Code).

Quiz 12: Negotiable Instruments, credit, and Bankruptcy