Question 1

What is the difference between the liability of a qualified indorser and an unqualified indorser? Does the fact that a person has given a qualified indorsement mean that the person has no liability? Explain.

Accepted Answer

The answer of What is the difference between the liability...

Question 2

Zoron Company purchased a truck from Ace Motors.The sales personnel at Ace know that Anton Green is an executive at Zoron.To pay for the truck, Anton delivered a $26,000 note to Ace and signed it "Anton Green, Agent." In this case:

Accepted Answer

Anton signed the note as an agent for Zoron Company, indicating that Zoron is liable for payment as long as Ace Motors holds the note.

Question 3

Parties that are usually secondarily liable for an instrument are:

Accepted Answer

Indorsers and drawers are typically secondarily liable on an instrument. This means they only become liable if the primary party (such as the maker or acceptor) defaults and proper notice of dishonor is given.

Question 4

To certify a check, the bank must:

Accepted Answer

Certifying a check involves the bank writing an acceptance on the check itself, indicating that it has verified the drawer's account has sufficient funds and that the bank guarantees the check.

Question 5

Warranty liability applies to persons who:

Accepted Answer

Warranty liability applies to both those who transfer an instrument and those who obtain payment or acceptance of an instrument, as these actions imply certain assurances regarding the instrument's legitimacy and the rights to enforce it.

Question 6

Thomas is the treasurer of Oklaw, Inc.He has authority to sign on behalf of the company.One day, he signs a note as follows: "Thomas Maurtin, as treasurer." The company's name does not appear on the note.Is the company liable on the note? Is Thomas liable on the note? Explain.

Accepted Answer

The answer of Thomas is the treasurer of Oklaw, Inc.He...

Question 7

a.Discuss primary liability on a note; on a check.
b.What is secondary liability? What must be done before a person with secondary liability can be sued? Who has secondary liability on a note? Who has secondary liability on a check? 
c.How does contractual liability on the instrument differ from warranty liability?

Accepted Answer

The answer of a.Discuss primary liability on a note; on...

Question 8

List and generally explain the warranties on presentment.

Accepted Answer

The answer of List and generally explain the warranties on...

Question 9

Arthur is the payee of a negotiable promissory note on which Brian is the maker.Arthur indorses the note in blank and delivers it to Clark, who then transfers it to David without indorsement.David presents it to Brian for payment when it becomes due, but Brian claims he signed the note based upon fraud in the inducement and refuses to pay.
a.Who is primarily liable on the instrument? Who is secondarily liable on the instrument? 
b.Who has warranty liability? Why? Explain.
c.From whom can David try to collect now that Brian refuses to pay?

Accepted Answer

The answer of Arthur is the payee of a negotiable...

Question 10

a.What warranties are given by an indorser? 
b.What warranties are given by a transferor by delivery without indorsement? 
c.If a person has no contractual liability on the instrument, does that mean he has no liability as a result of the transaction involved? Explain.

Accepted Answer

The answer of a.What warranties are given by an indorser?...

Question 11

Franz signs a $1,000 note payable to ABC Bank.To help Franz get the loan approved, Amy also signs the note as an accommodation maker.Amy:

Accepted Answer

Amy, as an accommodation maker, and Franz both have primary liability to the bank for the full amount of the note. This means both are equally and fully responsible for repaying the $1,000 to ABC Bank.

Question 12

Discuss the effect of an unauthorized signature on an instrument.

Accepted Answer

The answer of Discuss the effect of an unauthorized signature...

Question 13

JimBob, a guest in Jimbo's house, opens Jimbo's desk and writes a check to himself on Jimbo's checking account, forging Jimbo's signature.He indorses the check " JimBob Saunders" and presents it to Jimbo's bank for payment.If the bank pays, can it collect from Jimbo's account?

Accepted Answer

BThe bank cannot collect from Jimbo's account because the signature on the check was forged, which means Jimbo did not authorize the transaction. Additionally, Jimbo's lack of knowledge about the check further invalidates the transaction from his account.

Quiz 26: Liability of Parties