Question 1

Which of the following did the court determine on appeal in Wawel Savings Bank v.Jersey Tractor Trailer Training Inc. ,the case in the text in which a lender who perfected an interest in a debtor's collateral claimed to have priority in bankruptcy over an entity who later entered into an agreement whereby it purchased rights to the debtor's accounts receivables?

Accepted Answer

A)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
B)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
C)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
D)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.
E)According to the court,the purchaser of the receivables "has priority over that interest if it is either a holder in due course or a purchaser of instruments," and the case was remanded for a determination as to whether the purchaser qualified as such.

Question 2

A party cannot be a holder in due course of a non-negotiable instrument.

Accepted Answer

According to the Uniform Commercial Code (UCC), a party can only be a holder in due course if the instrument in question is negotiable. Non-negotiable instruments, such as contracts, do not qualify for holder in due course status.

Question 3

A transaction involving a promissory note is a legitimate documentary transaction in Russia.

Accepted Answer

A promissory note is a legally recognized type of negotiable instrument in Russia, which means that it can be used as a form of payment or as a means of obtaining credit. As a result, transactions involving promissory notes are considered to be legitimate documentary transactions under Russian law.

Question 4

What is meant by the term "delivery" in the process of negotiation?

Accepted Answer

A)Delivery simply means the physical handing of an instrument from someone
entitled to it,to the person intended to receive it.
B)Delivery simply means the physical handing of an instrument from someone entitled to it,to the person intended to receive it.
C)Delivery simply means the physical handing of an instrument from someone entitled to it,to the person intended to receive it.
D)Delivery simply means the physical handing of an instrument from someone entitled to it,to the person intended to receive it.
E)Delivery simply means the physical handing of an instrument from someone entitled to it,to the person intended to receive it.

Question 5

In Southwest Bank,the case in the text in which an employee of the plaintiff fraudulently deposited into her personal account at the defending bank checks for which the plaintiff was payee.The plaintiff sued the defending bank for checks endorsed by the employee "for deposit only" and with no endorsement from the plaintiff.Which of the following was the result in this case?

Accepted Answer

A)The trial court found Southwest Bank liable.The court held that under Texas commercial code,"a depository bank warrants to a payor bank to which a missing endorsement check is presented for payment that it was entitled to enforce the draft on behalf of a person entitled to enforce the draft.Thus,a depository bank is liable for conversion as a matter of law when it accepts for deposit into a third party's account checks that were not endorsed in the name of the payee."
B)The trial court found Southwest Bank liable.The court held that under Texas commercial code,"a depository bank warrants to a payor bank to which a missing endorsement check is presented for payment that it was entitled to enforce the draft on behalf of a person entitled to enforce the draft.Thus,a depository bank is liable for conversion as a matter of law when it accepts for deposit into a third party's account checks that were not endorsed in the name of the payee."
C)The trial court found Southwest Bank liable.The court held that under Texas commercial code,"a depository bank warrants to a payor bank to which a missing endorsement check is presented for payment that it was entitled to enforce the draft on behalf of a person entitled to enforce the draft.Thus,a depository bank is liable for conversion as a matter of law when it accepts for deposit into a third party's account checks that were not endorsed in the name of the payee."
D)The trial court found Southwest Bank liable.The court held that under Texas commercial code,"a depository bank warrants to a payor bank to which a missing endorsement check is presented for payment that it was entitled to enforce the draft on behalf of a person entitled to enforce the draft.Thus,a depository bank is liable for conversion as a matter of law when it accepts for deposit into a third party's account checks that were not endorsed in the name of the payee."
E)The trial court found Southwest Bank liable.The court held that under Texas commercial code,"a depository bank warrants to a payor bank to which a missing endorsement check is presented for payment that it was entitled to enforce the draft on behalf of a person entitled to enforce the draft.Thus,a depository bank is liable for conversion as a matter of law when it accepts for deposit into a third party's account checks that were not endorsed in the name of the payee."

Question 6

At any date after the expressed due date on a time instrument,the instrument becomes overdue.

Accepted Answer

This is because a time instrument, such as a promissory note or a bill of exchange, becomes due on the date specified on the instrument. If the instrument is not paid by that due date, it becomes overdue.

Question 7

An endorsement to prohibit further endorsement prohibits further transfer.

Accepted Answer

The answer of An endorsement to prohibit further endorsement prohibits...

Question 8

Once an instrument is negotiable,it remains negotiable.

Accepted Answer

A negotiable instrument retains its negotiability unless it is specially endorsed or restricted.

Question 9

Negotiability can be destroyed by a conditional endorsement.

Accepted Answer

The answer of Negotiability can be destroyed by a conditional...

Question 10

A person who engages in fraud may not obtain the rights of an HDC.

Accepted Answer

One of the requirements to be considered a holder in due course is that the person must have acquired the instrument in good faith, without notice of any fraud or illegality affecting the instrument. If a person has engaged in fraud, they cannot fulfill this requirement and therefore cannot be considered an HDC.

Question 11

An instrument is dishonored when a party refuses to pay the instrument,such as when a bank refuses to pay because insufficient funds exist.

Accepted Answer

This is correct. An instrument, such as a check, is considered dishonored when a party refuses to pay it, typically due to insufficient funds.

Question 12

A bank has given value for a negotiable instrument to the extent that the bank has a security interest in the instrument.

Accepted Answer

According to Article 3 of the Uniform Commercial Code, a bank giving value for a negotiable instrument acquires a security interest in the instrument to the extent of the value given.

Question 13

When an instrument is payable to joint payees,the endorsements of all listed payees are required before the instrument can be negotiated.

Accepted Answer

This is the general rule for instruments payable to joint payees. All payees must endorse before the instrument can be negotiated. There are some limited exceptions to this rule, such as in cases where one of the joint payees is a bank or where the instrument specifies that only one of the payees needs to endorse.

Question 14

In order for a holder to acquire the rights and privileges of an HDC,an instrument must be transferred directly from the HDC to the holder.

Accepted Answer

A holder can acquire the rights and privileges of a holder in due course (HDC) from any prior holder, not necessarily directly from the HDC, as long as the instrument meets the requirements for HDC status under the Uniform Commercial Code (UCC).

Question 15

Which of the following is a written document signed by the maker or drawer with an unconditional promise or order to pay a certain sum in money on demand or at a specified time to the order of bearer?

Accepted Answer

A)A negotiable instrument is a written document signed by the maker or drawer
with an unconditional promise or order to pay a certain sum of money on demand or at a specified time to the order of bearer UCC Section 3-104).
B)A negotiable instrument is a written document signed by the maker or drawer with an unconditional promise or order to pay a certain sum of money on demand or at a specified time to the order of bearer UCC Section 3-104).
C)A negotiable instrument is a written document signed by the maker or drawer with an unconditional promise or order to pay a certain sum of money on demand or at a specified time to the order of bearer UCC Section 3-104).
D)A negotiable instrument is a written document signed by the maker or drawer with an unconditional promise or order to pay a certain sum of money on demand or at a specified time to the order of bearer UCC Section 3-104).
E)A negotiable instrument is a written document signed by the maker or drawer with an unconditional promise or order to pay a certain sum of money on demand or at a specified time to the order of bearer UCC Section 3-104).

Question 16

The transferability of an instrument may be limited by a restrictive endorsement.

Accepted Answer

The answer of The transferability of an instrument may be...

Question 17

The requirement that a holder in due course must take an instrument for value can be satisfied by receiving an instrument as a gift.

Accepted Answer

The requirement that a holder in due course must take an instrument for value cannot be satisfied by receiving an instrument as a gift. Value must be given in exchange for the instrument to meet this requirement.

Question 18

Allison worked for ABC Company as the company treasurer.She took 20 of ABC Company's checks,labeled as belonging to ABC Company.Over the course of one year,she signed and mailed the checks to American Express,her own credit card company,to pay her personal credit card debt.Assuming the court follows Watson Coatings Inc. ,v.American Express Travel Services Inc. ,the case in the text,which of the following is the most likely result in a lawsuit by ABC Company against American Express to recover the amounts of the checks?

Accepted Answer

A)Under similar facts,it was determined in Watson Coatings Inc. ,v.American Express Travel Services Inc. ,that American Express qualified as a holder in due course,took the checks in good faith,and was entitled to a summary judgment ruling in its favor.
B)Under similar facts,it was determined in Watson Coatings Inc. ,v.American Express Travel Services Inc. ,that American Express qualified as a holder in due course,took the checks in good faith,and was entitled to a summary judgment ruling in its favor.
C)Under similar facts,it was determined in Watson Coatings Inc. ,v.American Express Travel Services Inc. ,that American Express qualified as a holder in due course,took the checks in good faith,and was entitled to a summary judgment ruling in its favor.
D)Under similar facts,it was determined in Watson Coatings Inc. ,v.American Express Travel Services Inc. ,that American Express qualified as a holder in due course,took the checks in good faith,and was entitled to a summary judgment ruling in its favor.
E)Under similar facts,it was determined in Watson Coatings Inc. ,v.American Express Travel Services Inc. ,that American Express qualified as a holder in due course,took the checks in good faith,and was entitled to a summary judgment ruling in its favor.

Question 19

A payee may not be a holder in due course.

Accepted Answer

The answer of A payee may not be a holder...

Question 20

When a consumer credit contract is transferred to a subsequent holder,the holder obtains the rights of an HDC.

Accepted Answer

A subsequent holder of a consumer credit contract does not automatically obtain the rights of a Holder in Due Course (HDC) due to specific consumer protection laws that limit these rights to protect consumers.

Quiz 27: Negotiation, holder in Due Course, and Defenses