Question 1

Tyrone draws a check payable to "Cash" and presents it to United Bank for payment.This instrument is

Accepted Answer

A check payable to "Cash" is a bearer instrument, which means that whoever has possession of the check is entitled to the money, without the need to endorse the check.

Question 2

To pay for a new desk bought at Office Outlet,Pete makes a check payable to "Offs Outlet." A proper indorsement of the check is

Accepted Answer

A proper indorsement of the check should include the name of the payee as it appears on the check. In this case, the name on the check is "Offs Outlet," which is likely a typo for "Office Outlet." Therefore, the indorsement should include either "Office Outlet" or "Offs Outlet" to ensure that the check can be properly processed and deposited. "Pete" is not the payee and cannot indorse the check.

Question 3

Pola wants to transfer a check to Quin.The check is defective if it

Accepted Answer

A check that has been previously dishonored means that it was not paid by the bank when it was first presented for payment. This makes the check defective and it cannot be transferred to Quin. The other options (B, C, D) do not necessarily make the check defective and therefore do not affect Pola's ability to transfer it to Quin.

Question 4

On the back of a check payable to Nero,he writes "Pay to Odell,without recourse" and signs it.This

Accepted Answer

By writing "Pay to Odell,without recourse" on the back of the check, Nero is transferring the liability of the check to Odell. This means that if the check bounces or there is any issue with it, Nero cannot be held liable as he has relinquished his rights to any recourse. However, this does not render the check non-negotiable or affect the negotiability of any party involved.

Question 5

On May 1,Doug signs a check that is payable to the order of Extra Credit Corporation and that is dated July 1.This check is

Accepted Answer

The check is signed by Doug, which means he has authorized payment to Extra Credit Corporation. The fact that it is postdated (dated for a future date) does not affect its negotiability. As long as the payee (Extra Credit Corporation) endorses the check, it can be cashed or deposited before the date written on it. Therefore, the check is negotiable.

Question 6

Wilbur signs a note that includes a clause under which the note's holder can delay the date of its payment indefinitely.This is

Accepted Answer

An extension clause allows the note's holder to delay the date of its payment indefinitely.

Question 7

Don writes a check to Eve drawn on Don's account at First Bank.Eve presents the check for payment to First Bank,which accepts it.The bank is

Accepted Answer

As the check was drawn on Don's account at First Bank and the bank accepted the check for payment, the bank is primarily liable for payment. However, if there are insufficient funds in Don's account, Don may also be held liable for payment.

Question 8

EZ Credit Company signs an instrument payable to the order of Flem that states,"The maker of this note at the date of maturity,May 1,2013,can extend the time of payment,but for no more than a reasonable time." This instrument is

Accepted Answer

The instrument is nonnegotiable because it does not have a definite time for payment due to the extension clause, which allows the maker to extend the payment time.

Question 9

Ollie negotiates an order instrument to Phil by

Accepted Answer

Delivery with any necessary indorsement is the proper way to negotiate an order instrument, which is a negotiable instrument that is payable to a specific person or their order. By delivering the instrument to Phil with the necessary indorsement, Ollie is transferring ownership and the right to receive payment to Phil. The other options do not apply to order instruments.

Question 10

Owen is a holder of a promissory note obtained from Purchase Money,Inc.Regarding the defenses against payment of the note to which Purchase Money is subject,Owen,as an ordinary holder,is subject to

Accepted Answer

As an ordinary holder, Owen is subject to the same defenses against payment of the note that Purchase Money would be subject to. This means that if Purchase Money is subject to certain defenses such as fraud or mistake, Owen would also be subject to those same defenses. However, if Owen is a "holder in due course" he would be subject to fewer defenses.

Question 11

Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment,Biff's liability on this note is

Accepted Answer

Biff's liability on this note is primary because the note is payable to the order of a specific payee (County Credit Union) and Biff has assumed the primary obligation to pay the note unless he has a valid defense against payment.

Question 12

Vladimir negotiates a bearer instrument to Wendy by

Accepted Answer

Negotiation by delivery is the transfer of possession of the negotiable instrument from one person to another, with the intention of transferring ownership. The bearer instrument is transferred by delivery, and Wendy becomes the new holder of the instrument. Assignment (A) is the transfer of a negotiable instrument by a person (assignor) to another (assignee) where the assignor transfers the property rights, but not the ownership of the instrument. Presenting it in response to a demand by Wendy (C) is not applicable in the case of a bearer instrument. Promising to pay (D) is not a form of negotiation.

Question 13

Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games.This instrument is

Accepted Answer

Since the check is payable to "Replay Stadium", it is an order instrument, meaning that it can only be deposited or cashed by the named payee (in this case, Replay Stadium). It is not a bearer instrument, which can be negotiated by anyone in possession of the instrument, nor is it invalid or void. Additionally, it is negotiable since it meets the requirements set forth in the Uniform Commercial Code.

Question 14

Todd indorses a check,"Pay to Interstate Trucking if they deliver the lumber by May 1,2010." This is

Accepted Answer

The indorsement "Pay to Interstate Trucking if they deliver the lumber by May 1, 2010" places a condition on the payment and limits the rights of the subsequent endorsers. This is a restrictive indorsement.

Question 15

Petra signs a check payable to Quincy,who indorses the back,gives it to Regional Credit Union,and receives cash.The transfer of the check from Quincy to the credit union is

Accepted Answer

The transfer of the check from Quincy to the credit union is a negotiation because Quincy, as the payee, indorsed the check thereby transferring his ownership interest to the credit union. And the credit union gave him cash in exchange for the check.

Question 16

Nero signs a check "pay to the order of Olive" drawn on Nero's account in Plum Bank.Olive signs the back of the check.Secondary liability on this check extends to

Accepted Answer

Both Nero and Olive are liable for the check because Nero signed it and Olive endorsed it. Plum Bank may also be liable if they do not properly verify the endorsement or if there are insufficient funds in Nero's account to cover the check.

Question 17

Kris transfers a note,on which Liu is the maker,to Mia,who takes it for value and in good faith.Mia knows that Kris breached the contract underlying the note,giving Liu a defense against payment.With respect to this note,Mia is

Accepted Answer

Mia is an ordinary holder because she took the note for value and in good faith but was aware of the breach of contract by Kris, which gives Liu a defense against payment. Mia is not a holder in due course because she had knowledge of the defense.

Question 18

Superior Company draws a check payable to Ted.Uri makes a note payable to Vital Finance Corporation.Primarily liable parties include

Accepted Answer

The answer of Superior Company draws a check payable to...

Question 19

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim,defense,or defect.With respect to this check,Kilroy is

Accepted Answer

The answer of Jen makes a gift of a check...

Question 20

Nina wants to transfer a check to Opie.The check is not defective if it

Accepted Answer

If the check has been previously honored, then it is assumed to be valid and can be transferred to Opie without issue. The other choices would make the check defective and therefore not able to be transferred.

Quiz 22: Negotiable Instruments: Transferability Liability