Question 1

The Gulf States Section,PGA,Inc.v.Whitney National Bank of New Orleans case addressed liability on a negotiable instrument:

Accepted Answer

B

Question 2

Vince has possession of a draft that has been validly negotiated to him.His payment process necessarily includes:

Accepted Answer

When a draft or check is negotiated to someone, they must exhibit the instrument (show the check or draft), show reasonable identification (to prove they are the authorized holder), and surrender the draft once it is paid (if it is being paid in full). This process ensures that the payment is valid and protects both parties. Options A, C, and D do not accurately describe the payment process for negotiations of drafts.

Question 3

An agent must clearly indicate that he or she is signing on behalf of a principal in order to bind the principal.

Accepted Answer

False

Question 4

At the time a check is issued,primary liability falls on:

Accepted Answer

The answer of At the time a check is issued,primary...

Question 5

Maurina is an agent of Southland,and she is authorized to sign checks on Southland's bank account.If Maurina signs a check without indicating that she is simply an agent,Maurina will be personally liable on the check.

Accepted Answer

The answer of Maurina is an agent of Southland,and she...

Question 6

The accidental destruction of a negotiable instrument will result in its cancellation.

Accepted Answer

The accidental destruction of a negotiable instrument does not cancel it; the rights and obligations associated with it still exist, and a duplicate or proof of its terms may be used to enforce it.

Question 7

Suppose that Emmett impersonates a famous clown.He goes into an advertising agency and convinces the manager to issue a check to him in the name of the famous clown,purportedly as part of a fund-raising campaign for a nursing home for old retired clowns.If Emmett negotiates the check to a check-cashing store by forging the name of the famous clown,then the ad agency will be able to argue that the bank must reimburse the account because the bank paid a check on a forged signature.

Accepted Answer

The answer of Suppose that Emmett impersonates a famous clown.He...

Question 8

Lance indorses a promissory note to Connie in exchange for consideration.Unknown to Lance,the note is not good because the maker's signature was forged.Connie later attempts to present the instrument for payment to the original alleged maker,Lilly,who is able to deny liability for payment due to the forged signature.Connie may later sue Lance for breach of a transfer warranty.

Accepted Answer

Lance made a transfer warranty by endorsing the promissory note, and if the signature of the maker was forged, Lance breached that warranty. Connie can sue Lance for the breach of warranty.

Question 9

Negotiable instruments are usually not issued to fulfill a contract.

Accepted Answer

Negotiable instruments are often issued as a form of payment or as a means of borrowing money, but they are not typically issued to fulfill a specific contract. They are instead used as a separate legal instrument to facilitate transactions and provide a measure of security for the parties involved.

Question 10

Drawers and indorsers are secondarily liable on negotiable instruments.

Accepted Answer

Drawers and indorsers are considered secondary parties liable on negotiable instruments, meaning that they are responsible for paying the amount due if the primary party (usually the maker or issuer of the instrument) does not pay.

Question 11

An indorser who writes "without recourse" above her signature on a negotiable instrument is not liable for payment.

Accepted Answer

When an indorser writes "without recourse" above their signature, they are indicating that they are not assuming liability for payment of the negotiable instrument. Therefore, they are not liable for payment.

Question 12

Assume that Mike signs a promissory note to Carl,who in turn negotiates the instrument to Luke.Of the three,Mike is the only person who has primary liability.

Accepted Answer

Under the concept of negotiable instruments, the person who signs the promissory note (i.e., the maker) is the one who has primary liability to pay the instrument when it is due. In this case, Mike signed the promissory note, so he is the one with primary liability. Carl and Luke may have secondary liability if they endorse or guarantee the instrument, but they do not have primary liability.

Question 13

Paula is a sales agent for The Rock Insurance Company.Paula accepts a check from a customer made payable to her in payment for the premium on an insurance policy.Prior to depositing the check in The Rock's bank account,Paula indorses the check as follows: "The Rock Insurance Company,by Paula Beck,agent." Assuming that Paula has authority to indorse company checks,if the check is dishonored,then between Paula,The Rock,and the bank:

Accepted Answer

The Rock only will be liable because Paula, acting within her authority, indorsed the check on behalf of The Rock Insurance Company, making the company the party responsible for the check.

Question 14

A person who adds her signature to an instrument for the purpose of being liable on it is an accommodation party.

Accepted Answer

This is the definition of an accommodation party under the Uniform Commercial Code.

Question 15

When a negotiable instrument is transferred,the transferor warrants that:

Accepted Answer

When a negotiable instrument is transferred, the transferor warrants that the instrument has not been altered, all signatures are authentic, and as far as she knows the issuer is solvent. This means that all of the above choices are correct.

Question 16

Nelson writes Leah a check for mowing his lawn.Leah deposits the check in her bank,but it is not paid by Nelson's bank.Leah calls Nelson to notify him that her bank returned his check to her unpaid.Leah's notice of the dishonor is insufficient; she must provide written notice.

Accepted Answer

Leah's notice of the dishonor may be oral, and does not necessarily have to be in written form.

Question 17

A person may be held liable on a negotiable instrument even if that person has not signed the instrument.

Accepted Answer

The concept of liability on a negotiable instrument is not limited to the person who has signed the instrument. Other parties may also be held liable, including those who have endorsed the instrument or guaranteed the payment. This allows for the transferability and flexibility of negotiable instruments in commerce.

Question 18

A drawee has primarily liability on a draft.

Accepted Answer

The answer of A drawee has primarily liability on a...

Question 19

The case Wachova Bank v.Foster Bancshares is about liability for paying a stolen check.

Accepted Answer

The case Wachova Bank v. Foster Bancshares is indeed about liability for paying a stolen check.

Question 20

Warranty liability is the liability of someone who receives payment on a negotiable instrument.

Accepted Answer

The answer of Warranty liability is the liability of someone...

Quiz 23: Liability for Negotiable Instruments