Question 1

Bob writes a check on his account at County Bank to Dona,a famous singer.The person claiming to be Dona is an imposter,however,named Edy.Edy indorses the check to Frank,for whom County Bank cashes it.Ultimately,the loss will most likely fall on

Accepted Answer

Bob bears the responsibility to ensure that the person he is writing the check to is the actual payee, and he did not fulfill this responsibility. Therefore, the loss falls on him.

Question 2

Opal asks Paolo,who does not understand English,to sign what Opal says is an application to open a bank account.In fact,the "application" is a note.If sued on the note by an HDC,Paolo's best defense would be

Accepted Answer

Paolo can claim fraud in the execution because he was deceived as to the nature of the document he signed. He believed he was signing an application to open a bank account, but in reality, it was a note. This defense would void the note and release Paolo from any legal obligations.

Question 3

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 is drawn on Don's account at First Bank, the bank is primarily liable for payment. This means that if there are any issues with the check, such as insufficient funds, it is the bank's responsibility to make sure the check is not paid. However, the bank can still seek reimbursement from Don if necessary.

Question 4

Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie.The price of the shares is constantly fluctuating.Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase.Eppie agrees.Fund Investments buys the stock when the price is $4,000,but fills in the check for $5,000.The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services,which takes the check in good faith and without notice of Fund Investments's act.Hasty later learns that Fund Investments was not authorized to fill in the check for $1,000 over the price.Is Hasty an HDC? If so,for how much?

Accepted Answer

The answer of Eppie gives a check to Fund Investments...

Question 5

State Bank receives a check drawn by Tricia.The check is received after the established "cutoff" hour.Payment can be postponed without dishonor

Accepted Answer

According to the Uniform Commercial Code (UCC) § 4-108, banks have until the close of the next business day to decide whether to accept or dishonor a check received after the established cutoff hour. Therefore, payment can be postponed until the close of the next business day without dishonor.

Question 6

Fact Pattern 16-2 
Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then in¬dorses it to Nat, the present holder.

-Refer to Fact Pattern 16-2.Suppose that Mona pays Nat on the note.With timely notice to the proper parties,Mona may collect payment on the note from

Accepted Answer

Mona, as an indorser who paid the note, can seek reimbursement from any prior indorsers or the maker, which includes Jake, Kim, or Lou.

Question 7

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

Nero is the primary liable party as the drawer of the check, and Olive is the secondary liable party as the endorser. However, Plum Bank may also be held liable if they do not properly verify the endorsement and allow an unauthorized party to cash the check. Therefore, the secondary liability extends to Nero and Olive as well as Plum Bank.

Question 8

Vera gives Willy a $500 check as payment for a debt.Willy crudely raises the amount of the check to $5,000 and transfers it to Xtreem Sportz store for a new bike.Xtreem deposits the check in its Yankee Bank account.Vera is liable for the payment of $5,000 to

Accepted Answer

The answer of Vera gives Willy a $500 check as...

Question 9

Fact Pattern 16-2 
Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then in¬dorses it to Nat, the present holder.

-Refer to Fact Pattern 16-2.Nat properly presents the note to Jake for payment,but Jake dishonors it.With timely notice to the proper parties,Nat may collect payment on the note from

Accepted Answer

Under the rules of negotiation, when a negotiable instrument is dishonored, the holder may seek payment from any prior endorsers (Kim, Lou, or Mona in this case) as long as timely notice of dishonor is given. Therefore, Nat can collect payment from any one or all of them.

Question 10

GR8 Products,Inc. ,warrants its goods to be free of defects.If Heck issues an instrument to obtain goods from GR8 that prove defective,Heck can avoid paying on the instrument

Accepted Answer

According to the given scenario, if the goods purchased from GR8 prove defective, Heck can avoid paying on the instrument, whether it is a check or a note. Therefore, the best choice is C, which mentions that Heck can avoid paying the instrument under any circumstances.

Question 11

Commercial Credit Company has in its possession an instrument dated May 1,2009.The instrument is payable to the order of Alpha Company "on June 1,2009," for $5,000.In the upper left corner is an address for Beta Corporation-10 Corporate Park Avenue,Chicago,Illinois-and in the lower right corner is the signature of "Delta,Inc. ,By Eve,President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank,President,May 5,2009." On the back is the signature of "Alpha Company by Gail,President." What type of instrument is this? Is it negotiable? Who,if anyone,is primarily liable on this instrument on May 1? On May 5? Who,if anyone,is secondarily liable on this instrument?

Accepted Answer

The answer of Commercial Credit Company has in its possession...

Question 12

Rodeo Ranch's agent Slim is authorized to draw checks on Rodeo Ranch's account in Town Bank.Upper Range Corporation is a Rodeo Ranch supplier.Slim writes a check "pay to the order of Upper Range [signed] Slim," indorses the check in Upper Range's name,and deposits it in his account in Verity Bank.If Verity Bank collects payment,the ultimate party most likely to suffer the loss is

Accepted Answer

Slim had no authority to use Rodeo Ranch's funds for his own benefit, so Rodeo Ranch will likely suffer the loss if Verity Bank collects payment on the check. Upper Range and Town Bank are both innocent parties and not at fault in this situation.

Quiz 16: Negotiability,transferability,and Liability