Deck 25: Defenses

Question 1

A defense that cannot be used against a holder in due course is known as a _____.

A) limited defense
B) conditional defense
C) universal defense
D) common defense

Answer 1

A

Question 2

Which of the following is a scenario where a universal defense can be applied?

A) A is induced to execute a commercial paper wrongly through misrepresentation.
B) A delivers a check to B, who is a minor, and he loses it.
C) A and B are engaged in a dispute over a contract and a third party is involved.
D) A delivers a check to B with a condition not to deliver it to C, but B delivers it anyway.

Answer 2

B

Question 3

When a person knows commercial paper is being executed but is induced to execute it because of false representations,  this is a defense against a holder in due course.

Answer 3

False

Question 4

When an alteration is fraudulently made, the party whose obligation is affected by the alteration is discharged.

Question 5

A thief can pass good title of an instrument to a holder in due course.

Question 6

Those defenses thought to be so important that they are preserved even against a holder in due course are called real.

Question 7

A limited defense can be used against a holder in due course.

Question 8

James agreed to remodel Ryan's house for a specified fee. However, James failed to complete the job properly and Ryan refused to pay him. James had previously assigned the right to payment to Blake. Which of the following is legally permissible in this scenario?

A) Blake and James can jointly claim payment from Ryan.
B) James can claim compensation through a court of law.
C) Ryan can claim contract breach and refuse payment to Blake.
D) Blake can claim payment as he did not breach any specific contract.

Question 9

In general, the defenses available in a dispute over a contract can be raised against holders in due course.

Question 10

When the duress nullifies a contract, the defense is limited.

Question 11

Minority is not a defense that can be preserved even against a holder in due course.

Question 12

Which of the following is a definition of a universal defense?

A) It is a defense that can be used only against a holder in due course.
B) It is a defense that cannot be used against a holder in due course.
C) It is a defense that can be used only against the first holder.
D) It is a defense that can be used against any holder.

Question 13

Joyce gives a check to Chris, a minor, in order to give it to James. However, Chris loses the check. Which of the following is likely to occur in this scenario?

A) Joyce can ask James to claim compensation from Chris.
B) Joyce must re-issue another check toward James as a contract with Chris is invalid.
C) Joyce can withhold payment to James, as she has already issued a valid check through Chris.
D) Joyce can claim compensation from Chris for losing the check.

Question 14

Even in cases in which the defendant's negligence made the forgery possible, forgery may be raised successfully against any holder.

Question 15

When a person knowingly executes a negotiable instrument but is persuaded to do so because of false statements, the defense is a limited one.

Question 16

Which of the following best describes alteration?

A) It is an authorized change in an instrument that does not necessarily modify the obligation of a party.
B) It is an authorized change in an instrument that is done during the process of theft.
C) It is an unauthorized change in an instrument that purports to modify in any respect the obligation of a party.
D) It is an authorized change in an instrument that is done under duress.

Question 17

All holders are subject to the defense that a discharge in bankruptcy has been granted.

Question 18

Explain any two types of hybrid defenses.

Question 19

Which of the following is legally permissible in the case of a theft of a negotiable instrument?

A) A thief can require payment of a stolen paper.
B) A holder can declare the instrument to be void.
C) A thief can pass on the title to the person the paper was made out to.
D) An ordinary holder can require payment of the instrument.

Question 20

Mike makes out a check to Vin's name and delivers it to Ben. However, Mike asks Ben to hold onto to the check until he receives goods from Vin, but Ben delivers it to Vin who then refuses to supply the goods. Which of the following is likely to occur in this case?

A) Ben can be sued by Mike for breaking his trust.
B) Mike is liable to pay the check despite not receiving the goods.
C) Mike can reclaim the check from Vin through a court of law.
D) Vin is entitled to deposit the check and keep the goods with him.