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Exam 18: Negotiability, transferability, and Liability

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Question 1

True/False

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An indorser is secondarily liable on an instrument.

A) True
B) False

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Question 2

Multiple Choice

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Reel Time Film Production Company issues a promissory note as a demand instrument with a due date of October 5.Syncopated Loan Company accepts the note.Syncopated has notice that the note is overdue if the firm takes the note

A) an unreasonable time after October 5.
B) before October 5.
C) on or after October 5.
D) on or before October 5.

E) A) and B)
F) None of the above

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Question 3

True/False

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An instrument payable to the order of a specified person is negotiable.

Nina is an administrative assistant with Open Pit BBQ Corporation,but has no authority to sign Open Pit checks.Nina orders merchandise from Pleasant Retail Company delivered to her home and pays with an Open Pit check,signing "Open Pit BBQ Corp.by Nina,admin.assist." Pleasant does not know that Nina has no authority to sign the check.Who is liable on the check,and why?

A promise to give value in the future is normally sufficient to confer the rights of a holder in due course (HDC)on one in possession of a negotiable instrument.

Patch-It Roofing Company receives a check from Quik Mart for fixing its roof,and indorses the check to Repair Supplies,Inc.(RSI) .Sam,RSI's owner,gives the check to Todd as a gift.In this situation,the party who is not an HDC of the check but who acquires HDC rights under the shelter principle is

Ivan signs a promissory note payable to Jade on which Ivan conspicuously notes that it is "not negotiable" and gives the note to Jade.This instru?ment is

A notation on an instrument that it is "negotiable" is sufficient to render it negotiable.

Gasqard owes $6,000 in unpaid taxes.On the back of an old shirt,he exe?cutes an instrument for that amount that otherwise meets the re?quire?ments for negotiability.This instrument is likely

A drawer's liability arises before presentment and notice of dishonor.

Ilsa wants to negotiate a bearer instrument in her possession to Jia for an order instrument in Jia's possession.Indorsements are required to negotiate

A negotiable instrument serves as a substitute for cash.

A person can become an HDC only by acquiring an instrument with no?tice of any defect to it.

On behalf of Medical Imaging Company,Nonny signs an instrument in which she promises to deliver an MRI scanner to Openheart Cardia Clinic on June 1.This instrument is

Delores's Restaurante borrows $100,000 at 6 percent interest from El Credito y Dinero Company and signs a promissory note for that amount.El Credito changes the amount of the note to $120,000 and increases the rate to 8 per?cent.Delores's best defense against payment on the note is

A person can become an HDC only by acquiring an instrument with no?tice of any defense against payment on it.

An instrument that promises to pay "in gold" can be negotiable.

Vibrant Company gives a $3,000 promissory note to White Van Delivery Service to de?liver a load of computer chips to Vibrant's plant.The chips are contami?nated during transit,and are useless to Vibrant on delivery.Vibrant's best defense against payment on the note is

Kelly signs an instrument in favor of Len that states it is "subject to a cer?tain agreement between Kelly and Mona." This instru?ment is

Valley Properties,Inc.(VPI) ,signs an instrument in favor of Wellspring Finance Corporation that includes the statement "VPI plans to pay this debt from the proceeds of the sale of the VPI Office Building in Xibalba,Mexico." This instrument is