Question 1

Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Hearthstone Bank. Gerri presents the check for payment to Hearthstone,which accepts it. Primarily liable on the check is

Accepted Answer

Hearthstone Bank is primarily liable because it accepted the check, meaning it has agreed to pay the amount on the check to the holder.

Question 2

Idina wants to buy a promissory note from Jill. The note is due on April 1.a.m. on April 1 To become an HDC,Idina must buy the note

Accepted Answer

To become a holder in due course (HDC), Idina must purchase the promissory note before the due date, which is April 1. Therefore, she must buy the note before midnight on April 1 to be considered an HDC. Option B and C are not correct as they specify a time of day, but the due date is in the morning. Option D is also incorrect because the question states that the due date is April 1, so purchasing the note within 30 days of that date would not satisfy the requirement of being an HDC.

Question 3

GR8 Products,Inc.,warrants its goods to be free of defects. Heck issues an instrument to obtain goods from GR8 that prove defective. With respect to payment on the instrument,Heck

Accepted Answer

Heck has a personal defense against the instrument because the warranty was given by GR8 Products, Inc. and not by Heck himself. The warranty does not transfer to the instrument, so Heck can raise the defense that the goods were defective and therefore he should not be obligated to pay.

Question 4

Fanny signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Haji,who sells it to Iona. Liability associated with the transfer of the note from Haji to Iona is

Accepted Answer

The liability associated with the transfer of a negotiable instrument like a note is typically warranty liability. When Haji sells the note to Iona, Haji provides certain warranties regarding the note, such as that it is genuine, has not been altered, and that he has good title to it.

Question 5

On the back of an envelope,Phoebe writes,"I promise to pay Quint or bearer $600 on de-mand. [Signed] Phoebe." What type of instrument is this? Is it nego-tiable? If not,why not?

Accepted Answer

The answer of On the back of an envelope,Phoebe writes,"I...

Question 6

Plumbing & Pipes Supply Company issues a promissory note as a demand instrument with a due date of October 5. QuikPay Loan Company accepts the note. QuikPay has notice that the note is overdue if the firm takes the note

Accepted Answer

The due date of the promissory note is on October 5, so if QuikPay takes the note after that date, it is considered overdue. Therefore, the best choice is A, after October 5.

Question 7

Lewis makes a note payable to Milly. She indorses the back of the note and negotiates it to Negotiable Investments,Inc. Primarily liable on the note is

Accepted Answer

Lewis, as the maker of the note, is primarily liable for its payment.

Question 8

Raul wants to transfer a check to Schmidt. The check is defective if it

Accepted Answer

The answer of Raul wants to transfer a check to...

Question 9

On a sheet of paper,Elle writes,without her signature,"I acknowledge that I owe Frank $600,payable out of the proceeds of the sale of my car,a 1995 Honda Civic,which I promise to advertise 'For Sale' next week. Payment is to be made on or before six months from today." What type of instrument is this? Is it nego-tiable? If not,why not?

Accepted Answer

The answer of On a sheet of paper,Elle writes,without her...

Question 10

Lenora signs a note "payable to the order of Medical Account Collection Agency." Unless Lenora has a valid defense against payment,Lenora's liability on this note is

Accepted Answer

When Lenora signs a note as "payable to the order of Medical Account Collection Agency," she is essentially creating a negotiable instrument, which can be transferred to another party (such as a bank or a creditor) for value. As the maker of this note, Lenora is immediately liable for payment unless she has a valid defense against payment (such as fraud, duress, or incapacity). Therefore, choice A is the correct answer. Choices B, C, and D are incorrect because they suggest that Lenora's liability on the note is dependent on certain conditions (such as payment demands, dishonor by the payee, or payment due dates), which is not necessarily the case.

Question 11

Ray pays Slim in good faith for a promissory note. Slim warrants that the note has not been altered. This is

Accepted Answer

The answer of Ray pays Slim in good faith for...

Question 12

Daria writes a check to Education Loan Management,Inc.,that is drawn on Daria's account at First Federal Bank. If the bank does not accept the check,liability for its amount is on

Accepted Answer

The account holder is ultimately responsible for ensuring that there are sufficient funds in their account to cover the amount of the check. If the bank does not accept the check due to insufficient funds or other reasons, the liability for the amount of the check falls on the account holder, in this case, Daria.

Quiz 23: Negotiable Instruments