Question 1

Because a party's authenticating intent with respect to a note is shown by the name of the party written on the line that calls for the name of that party,

Accepted Answer

A stamped imprint of the name can be sufficient for the transfer of the note because the Uniform Commercial Code (UCC) allows for various forms of signature, including stamped imprints, to demonstrate the authenticating intent of the party.

Question 2

On the back of a check "payable to Demos," Demos signs her name and negotiates the item to Ethos. To most effectively avoid a risk of loss from a theft of the check, Ethos should

Accepted Answer

Writing "Pay to Ethos" above Demos' signature and then endorsing it makes the check a special endorsement, which means it can only be further negotiated by Ethos. This reduces the risk of loss from theft since the check is now specifically payable to Ethos, making it harder for a thief to cash or deposit it without Ethos' endorsement.

Question 3

An instrument payable to two or more persons in the alternative, such as a check "payable to the order of Elena or Ferrar,"

Accepted Answer

When an instrument is payable to two or more persons in the alternative (using "or"), it requires the endorsement of only one of the parties to be negotiated. This allows for more flexibility in transferring the instrument.

Question 4

To make Credit Bank a collecting agent on a check "payable to the order of Duane," Duane should

Accepted Answer

The answer of To make Credit Bank a collecting agent...

Question 5

Resources Inc. receives a check from Steel Products Company and indorses it with a stamped imprint of its name on the back. This converts the check to

Accepted Answer

The answer of Resources Inc. receives a check from Steel...

Question 6

An instrument payable to two or more persons without an "and" or an "or" between the parties' names, such as a check "payable to the order of Gerhard Hans,"

Accepted Answer

The answer of An instrument payable to two or more...

Question 7

On the back of a check payable to Lo, she writes "Pay to Mei, without recourse" and signs it. This

Accepted Answer

The phrase "without recourse" when used by an endorser on a negotiable instrument, such as a check, indicates that the endorser does not wish to assume liability for the instrument. In this case, by writing "Pay to Mei, without recourse" and signing it, Lo is indicating that she does not want to be liable if the check is not honored. This does not affect the negotiability of the check or Mei's liability.

Question 8

Coki receives a payroll check from Data Solutions Inc. and indorses it by signing her name on the back of the check. This is

Accepted Answer

Signing one's name on the back of a check without any additional instructions or limitations is known as a blank endorsement. This allows the check to be cashed or deposited by anyone who holds it.

Question 9

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

Accepted Answer

Flem is not considered a holder in due course (HDC) because he has not yet given value for the instrument. An HDC must give value, take the instrument in good faith, and without notice that it is overdue or has any defenses against it. In this scenario, Flem has only promised future services, which does not fulfill the requirement of giving value at the time of the transaction.

Question 10

Vel indorses in blank a check payable to her order, and then loses it. Wang finds the check and, without indorsing it, sells it to Xhi. This is

Accepted Answer

A negotiation occurs when a check or other negotiable instrument is transferred to another party who becomes the holder. Since the check was indorsed in blank by Vel, it became payable to bearer and could be negotiated by delivery alone, which is what happened when Wang found it and sold it to Xhi.

Question 11

Farmers Field LLC negotiates a bearer instrument to Grain Co-op by delivery

Accepted Answer

Bearer instruments are negotiated by delivery alone, without the need for an indorsement or any other formalities.

Question 12

A payee or indorsee whose name is misspelled on an instrument

Accepted Answer

A payee or indorsee whose name is misspelled on an instrument can indorse it with the misspelled name, the correct name, or both to negotiate it further. This flexibility ensures that minor errors in spelling do not impede the negotiability of the instrument.

Question 13

On the back of a check "payable to Huan," Huan signs her name and negotiates the item to Ito. To avoid liability on the item if it is later dishonored, Ito should

Accepted Answer

Indorsing the check "without recourse" is a way for Ito to avoid liability if the check is dishonored. This type of endorsement means that Ito does not guarantee payment of the check to subsequent holders.

Question 14

Hedy draws a check "payable to the order of Ilsa or Jeto" and gives the check to Ilsa. Hedy's obligation on the check to Jeto is

Accepted Answer

Hedy's obligation to Jeto is suspended because the check is payable to the order of either Ilsa or Jeto, and since Ilsa has received the check, Jeto's right to claim the amount is on hold until further action is taken by Ilsa.

Question 15

Rehab LLC owes $20,000 to Stonemason Inc. Rehab executes a note to Stonemason as security for the debt. This security

Accepted Answer

The execution of a note as security for a debt satisfies the value requirement for Holder in Due Course (HDC) status because it represents a binding obligation.

Question 16

Emil writes and signs a check payable to "Film Arts Cinema." George, Film Arts' manager, indorses the check "For deposit only." This is

Accepted Answer

A restrictive indorsement is when the indorser includes a condition that limits the use of the check, such as "For deposit only." This restricts the check to being deposited rather than cashed or further endorsed.

Question 17

A conditional indorsement on the back of an instrument

Accepted Answer

A conditional indorsement does not affect the right of an indorsee to enforce the instrument, as the condition relates to the contract between the indorser and the indorsee, not the enforceability of the instrument itself.

Question 18

An instrument, such as a check, drawn payable to an organization

Accepted Answer

A) Instruments payable to an organization can indeed be negotiated by an authorized representative of that entity. This allows for the practical operation of business transactions where checks or other instruments are made payable to companies or other organizations rather than individuals.

Question 19

Durable Goods Inc. negotiates an order instrument to Equity Finance by delivery

Accepted Answer

Negotiating an order instrument typically requires any necessary indorsement to ensure the instrument is properly transferred and the new holder obtains the rights to enforce it.

Question 20

Machine Shop Inc. issues a payroll check drawn on Nation Bank "payable to the order of O'Dell." O'Dell takes the check to the bank and delivers it to the teller without signing it. This is

Accepted Answer

The answer of Machine Shop Inc. issues a payroll check...

Quiz 26: Transferability and Holder in Due Course