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Exam 22: Negotiable Instruments

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Question 21

Multiple Choice

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The term "issuer":

A) is not used in relation to commercial paper.
B) is an all-purpose term that means both maker and drawer.
C) is synonymous with drawee.
D) is used in relation to commercial paper only to indicate the bank which creates a certificate of deposit.

E) All of the above
F) A) and D)

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Question 22

True/False

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Margo is in possession of a check issued to her by Felix.The check states,"Pay to the order of Margo." If Margo wishes to transfer the check to Pete to pay a debt she owes him,all she needs to do is strike out her name on the front of the check,write in Felix's name and give it to him.

A) True
B) False

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Question 23

True/False

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Personal and real defenses are valid against an ordinary holder,only real defenses can be used against a holder in due course.

Discuss the effect on an instrument of:(a)contradictory amounts between the numerals and amount written in words on a check;(b)the interest rate left blank on a promissory note;and (c)contradictory terms that are typed onto a promissory note and terms that are preprinted on the note form.

List the warranties a transferor of a negotiable instrument makes.

Felicia,an elderly woman,does not speak or read English well.Felicia is a recent immigrant to this country.A dishonest immigration officer tells Felicia to sign several documents as being necessary to maintain her legal alien status.Unknown to Felicia,she signs a promissory note.The immigration officer thereafter sells the note to Neighborhood Bank,a holder in due course,who goes after Felicia for payment of the note.Felicia's defense to the Neighborhood Bank is:

Which of the following can be negotiable?

Sprock is a holder in due course on an instrument issued by Klingon.Which of the following defenses could be successfully raised by Klingon?

In good faith,Clinton gave Jane $500 for a negotiable promissory note made out to Jane for $550.She needed some money before the due date on the note,and Clinton had no notice of outstanding claims or other defects of the note.Clinton:

Tim buys a high-powered tool from Binford Tools to use on the construction of his own garage.Binford Tools provides a full warranty on the tool for the first six months.To pay for the tool,Tim signs a negotiable promissory note which contains the FTC Notice.Binford properly negotiates the note to First Finance.Within three weeks,the tool stops working and Binford refuses to repair or replace it.In the meantime,First Finance demands payment from Tim.Under the Federal Trade Commission rules,this consumer credit situation means First Finance can:

To be negotiated,bearer paper must simply be delivered to the recipient.

Under the UCC,a holder in due course is a holder who has given value for the instrument.Which of the following holders have given value for the instrument?

To pay for a minor repair,May writes a check for $50 to David,who indorses the check in blank and gives it to his sister,Glenda,for her birthday.She indorses the check in blank and gives it to her trash collector to pay her quarterly bill.Which of the following is correct?

When a negotiable instrument is transferred,the transferor warrants all EXCEPT:

Tim wrote a negotiable note.Subsequently,Tim's debts were discharged in bankruptcy.If a holder in due course presents the note for payment,Tim does not have to pay.

To be negotiable,a check must be in writing.Under the UCC,a check:

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

An accommodation party on a negotiable instrument:

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.

Which of the following would be notice of an overdue instrument?