Question 1

Which of the following is order paper?

Accepted Answer

If an instrument is payable to the order of a specific payee,it is called order paper,and it can be negotiated by transfer of possession of the instrument after indorsement by the person specified.

Question 2

John received a check from his employer marked "pay to the order of John Jones." John used this check to pay for groceries from ABC Foods.He wrote on the back of the check: "pay to ABC Foods,for groceries." Was this check properly negotiated?

Accepted Answer

If an instrument is payable to the order of a specific payee,it is called order paper,and it can be negotiated by transfer of possession of the instrument after indorsement by the person specified.

Question 3

What section of the UCC defines negotiation of a negotiable instrument and who is a holder?

Accepted Answer

UCC section 3-201 defines the term negotiation and holder as it relates to negotiable instruments.

Question 4

If the holder's name on an instrument is misspelled or wrong,then the indorsement:

Accepted Answer

If the holder's name on an instrument is misspelled or wrong,then legally the indorsement can be made either in his name or in the name that is on the instrument.

Question 5

________ is defined to mean "a signature (other than that of a maker,drawer or acceptor)that alone or accompanied by other words,is made on an instrument for purpose of (i)negotiating the instrument,(ii)restricting payment of the instrument,or (iii)incurring indorser's liability on the instrument."

Accepted Answer

Indorsement is defined to mean "a signature (other than that of a maker,drawer or acceptor)that alone or accompanied by other words,is made on an instrument for purpose of (i)negotiating the instrument, (ii)restricting payment of the instrument,or (iii)incurring indorser's liability on the instrument."

Question 6

Which of the following indorsements is a special indorsement?

Accepted Answer

A special indorsement contains the signature of the indorser along with words indicating to whom,or to whose order,the instrument is payable.

Question 7

Jackie Collins is issued a check payable to the order of Jacky Collens.She takes the check to the bank.In order to cash the check the bank will likely require her to:

Accepted Answer

If the holder's name on an instrument is misspelled or wrong,then legally the indorsement can be made either in his name or in the name that is on the instrument.However,any person who pays the instrument or otherwise gives value for it may require the indorser to sign both names.

Question 8

When a customer deposits a check to her account without an indorsement,the bank:

Accepted Answer

Occasionally,when a customer deposits a check to her account with a bank,she may forget to indorse the check.Instead of actually signing the customer's name to the check as the indorsement,the bank might just stamp on it that it was deposited by the customer or credited to her account.

Question 9

Under Revised Article 3,a person is a(n)________ if she is in possession of an instrument that is payable to bearer or made payable to an identified person and she is that identified person.

Accepted Answer

A person is a holder if she is in possession of an instrument (1)that is payable to bearer or (2)made payable to an identified person and she is that identified person.

Question 10

An instrument that is indorsed with a ________ indorsement remains "order paper."

Accepted Answer

An instrument that is indorsed with a special indorsement remains "order paper." It can be negotiated only with the indorsement of the person specified.

Question 11

Ahmed Cohen received a check for $5,000 for a used car he sold.The check did not specify to whom the check was payable.On the back of this check Ahmed wrote,in his handwriting,"Ahmed Cohen." This has the legal effect of:

Accepted Answer

If an indorser merely signs his name and does not specify to whom the instrument is payable,he has indorsed the instrument in blank.An instrument indorsed in blank is payable to the bearer (person in possession of it)and from that act is "bearer paper."

Question 12

If a check is drawn "Pay to the order of Maria" and Maria indorses it "pay to the order of Jay,Maria." This falls under:

Accepted Answer

A special indorsement contains the signature of the indorser along with words indicating to whom,or to whose order,the instrument is payable.

Question 13

Which of the following is bearer paper?

Accepted Answer

If an instrument is payable "to bearer" or "to cash," it is called bearer paper.It can be negotiated by giving it to the person to whom you wish to transfer it.No indorsement is necessary to negotiate an instrument payable to bearer.

Question 14

Rachel's father gave her a check drawn on his checking account marked "payable to the order of Rachel Stern." This instrument is order paper,because:

Accepted Answer

If an instrument is payable to the order of a specific payee,it is called order paper,and it can be negotiated by transfer of possession of the instrument after indorsement by the person specified. In this example,the check is order paper,not because the word "order" appears on the check but rather because it named a specific payee,Rachel Stern.

Question 15

When a holder makes a blank indorsement of a negotiable instrument that is bearer paper,what legal effect does this have?

Accepted Answer

An instrument indorsed in blank is payable to the bearer (person in possession of it)and from that act is "bearer paper." As such,the bearer negotiates it by transfer alone and no further indorsement is necessary for negotiation.

Question 16

Which of the following indorsements is a blank indorsement?

Accepted Answer

If an indorser merely signs his name and does not specify to whom the instrument is payable,he has indorsed the instrument in blank.

Question 17

Which of the following is an example of restrictive endorsements recognized under Article 3?

Accepted Answer

Among the more common restrictive indorsements are those indicating that the indorsement is for the benefit of someone other than the person to whom it is payable.For example,"Pay to Arthur Attorney in Trust for Mark Minor."

Question 18

Svetlana Mills gives a check "payable to the order of Svetlana Mills," to a shopkeeper for some groceries.Here,the check would be considered as negotiated only upon the fulfillment of which of the following conditions?

Accepted Answer

When an employer gives an employee,Susan Adams,a paycheck payable "to the order of Susan Adams," she is the holder of the check because she is in possession of an instrument payable to an identified person (Susan Adams)and she is that person.When she indorses (writes her name)on the back of the check and exchanges it for cash and merchandise at Ace Grocery,she has negotiated the check to the grocery store and the store is now the holder because it is in possession by transfer of a check and unless she specifies the grocery store by name,the check now is payable to bearer.

Question 19

If an order instrument is transferred without indorsement,then the instrument:

Accepted Answer

Except for the special provisions concerning depositary banks,if an order instrument is transferred without indorsement,the instrument has not been negotiated and the transferee cannot qualify as a holder.

Question 20

The transfer of an instrument:

Accepted Answer

Transfer of an instrument,whether or not the transfer is a negotiation,vests in the transferee any right of the transferor to enforce the instrument.

Quiz 32: Negotiation and Holder in Due Course