Question 1

A person is ________ if he has agreed to pay the negotiable instrument.

Accepted Answer

A person who is primarily liable has agreed to pay the negotiable instrument.For example,the maker of a promissory note is the person who is primarily liable on the note.

Question 2

The obligation of an acceptor is:

Accepted Answer

The acceptor of a draft is obligated to pay the draft according to the terms at the time of its acceptance.

Question 3

Tom steals Dave's checkbook, writes a check for $1,000,forges Dave's signature,and receives payment from Tom's bank.The bank paid in good faith.Who is liable to the bank for the $1,000 in this case?

Accepted Answer

If someone signs a person's name to a negotiable instrument without that person's authorization or approval,the signature does not bind the person whose name appears.

Question 4

Jack received a check as payment for the work he did.He indorsed the check "without recourse." What legal effect does this have?

Accepted Answer

The indorser can avoid secondary liability only by qualifying his indorsement,such as "without recourse," on the instrument when he indorses it.

Question 5

Chin wants to buy a small parcel of land.The seller requires a certified check as payment.Chin has a checking account with ABC bank;he prepares a check for the seller and then has the bank certify it.He then presents the check to the seller.Who may now be liable for payment of the amount of the check?

Accepted Answer

If the drawee bank certifies the check,it becomes primarily,or absolutely,liable for paying the check as it reads at the time of its acceptance,and its acceptance discharges the drawer and indorsers who indorsed before the acceptance.

Question 6

The drawee does not have liability on the instrument until it ________ the instrument.

Accepted Answer

The drawee does not have liability on the instrument until it signs the instrument.

Question 7

According to UCC section 3-401 which of the following does NOT constitute a valid signature of a negotiable instrument?

Accepted Answer

A signature on a negotiable instrument according to the UCC can be any name,word,or mark.

Question 8

Which of the following is true regarding an indorser's liability on a note?

Accepted Answer

An indorser is liable upon the dishonor by the maker (of a note),drawer (of an unaccepted draft)or the drawee (of an accepted draft),and the indorser's receipt of notice of the dishonor.

Question 9

Usually,who may have the power to surrender the instrument if full payment is made?

Accepted Answer

The party to whom the holder presents the instrument,without dishonoring the instrument,may surrender the instrument if full payment is made.

Question 10

Mike authorizes his agent,Ben to borrow a sum of $10,000 on his behalf from the National Bank.Ben signs his name to a note without disclosing that the signature was on behalf of Mike.Who is liable on the note?

Accepted Answer

For example,if Principal authorizes Agent to borrow money on Principal's behalf and Agent signs her name to a note without disclosing that the signature was on behalf of Principal,Agent is liable on the note.

Question 11

Which of the following is true regarding a drawee's liability on a check or a draft?

Accepted Answer

If the drawee bank certifies the check,it becomes primarily,or absolutely,liable for paying the check as it reads at the time of its acceptance,and its acceptance discharges the drawer and indorsers who indorsed before the acceptance.

Question 12

If Jay signs Mila's name to a negotiable instrument without Mila's authorization or approval:

Accepted Answer

If someone signs a person's name to a negotiable instrument without that person's authorization or approval,the signature does not bind the person whose name appears.

Question 13

Mike signs a note payable to a bank.The bank indorses and negotiates the note to Fay,who then indorses and negotiates it to Sam.Sam presents the note to Mike,who dishonors it.Then Sam decides to pursue Fay and the bank on their secondary indorsers' liability.Against whom can Sam proceed?

Accepted Answer

A person who is secondarily liable is like a guarantor on a contract;Article 3 requires a secondary party to pay the negotiable instrument only if a person who is primarily liable defaults on that obligation.

Question 14

A representative is personally liable to a holder in due course that took the instrument without notice that the representative was not intended to be liable if:

Accepted Answer

Except for the check situation noted above,a representative is personally liable to a holder in due course that took the instrument without notice that the representative was not intended to be liable if the form of the signature does not show unambiguously that the signature was made in a representative capacity.

Question 15

Maya Efrat,Chief Financial Officer for BAZ Inc. ,is authorized to sign checks for BAZ.She signs a check "BAZ Inc.by Efrat,Chief Financial Officer." Which of the following statements is most accurate?

Accepted Answer

When a representative signs an authorized signature to an instrument,then the representative is not bound provided the signature shows "unambiguously" that the signature was made on behalf of the represented person who is named in the instrument.

Question 16

National bank is reluctant to lend money to James because of his shaky financial condition.However,the bank is willing to lend money to James if he signs the note and a friend also signs the note.Here,the friend serves as the:

Accepted Answer

An accommodation party is a person who signs a negotiable instrument for the purpose of lending her credit to another party to the instrument but is not a direct beneficiary of the value given for the instrument.

Question 17

What form of liability exists when a party is only responsible to pay on a negotiable instrument in case of default of the party who shoulders the obligation of liability for the instrument?

Accepted Answer

The UCC requires a party that is secondary liable to pay on the negotiable instrument only if a person who is primarily liable defaults on that obligation.

Question 18

Menzes is the Treasurer of ABC Corp.As such,he is authorized to sign checks for the corporation.A supplier bills ABC for a legitimate obligation.Menzes makes out a check to the supplier and signs it "ABC Corp. ,by Menzes,Treasurer." Who is liable on this check?

Accepted Answer

When a representative signs an authorized signature to an instrument,then the representative is not bound provided the signature shows "unambiguously" that the signature was made on behalf of the represented person who is named in the instrument.

Question 19

Salmond signs a note for the purpose of lending credit to John.Salmond also makes his father Richard sign the note because of his shaky financial condition.This indicates that Richard has signed the note in the capacity of a(n):

Accepted Answer

An accommodation party is a person who signs a negotiable instrument for the purpose of lending her credit to another party to the instrument but is not a direct beneficiary of the value given for the instrument.

Question 20

If a person signs a check as an accommodation indorser:

Accepted Answer

If a person signs a check as an accommodation indorser,his contractual liability is that of an indorser.If the accommodation indorser has to make good on that liability,he can collect in turn from the person on whose behalf he signed.

Quiz 33: Liability of Parties

A person is ________ if he has agreed to pay the negotiable instrument.

The obligation of an acceptor is:

Tom steals Dave's checkbook, writes a check for $1,000,forges Dave's signature,and receives payment from Tom's bank.The bank paid in good faith.Who is liable to the bank for the $1,000 in this case?

Jack received a check as payment for the work he did.He indorsed the check "without recourse." What legal effect does this have?

The drawee does not have liability on the instrument until it ________ the instrument.

According to UCC section 3-401 which of the following does NOT constitute a valid signature of a negotiable instrument?

Which of the following is true regarding an indorser's liability on a note?

Usually,who may have the power to surrender the instrument if full payment is made?

Mike authorizes his agent,Ben to borrow a sum of $10,000 on his behalf from the National Bank.Ben signs his name to a note without disclosing that the signature was on behalf of Mike.Who is liable on the note?

Which of the following is true regarding a drawee's liability on a check or a draft?

If Jay signs Mila's name to a negotiable instrument without Mila's authorization or approval:

Mike signs a note payable to a bank.The bank indorses and negotiates the note to Fay,who then indorses and negotiates it to Sam.Sam presents the note to Mike,who dishonors it.Then Sam decides to pursue Fay and the bank on their secondary indorsers' liability.Against whom can Sam proceed?

A representative is personally liable to a holder in due course that took the instrument without notice that the representative was not intended to be liable if:

Maya Efrat,Chief Financial Officer for BAZ Inc. ,is authorized to sign checks for BAZ.She signs a check "BAZ Inc.by Efrat,Chief Financial Officer." Which of the following statements is most accurate?

National bank is reluctant to lend money to James because of his shaky financial condition.However,the bank is willing to lend money to James if he signs the note and a friend also signs the note.Here,the friend serves as the:

What form of liability exists when a party is only responsible to pay on a negotiable instrument in case of default of the party who shoulders the obligation of liability for the instrument?

Menzes is the Treasurer of ABC Corp.As such,he is authorized to sign checks for the corporation.A supplier bills ABC for a legitimate obligation.Menzes makes out a check to the supplier and signs it "ABC Corp. ,by Menzes,Treasurer." Who is liable on this check?

Salmond signs a note for the purpose of lending credit to John.Salmond also makes his father Richard sign the note because of his shaky financial condition.This indicates that Richard has signed the note in the capacity of a(n) :

If a person signs a check as an accommodation indorser: