Q&A Hero

Q: Ellen pays State Bank $500 plus a service fee to draw a check on itself payable to Paul's Plumbing. Which of the following parties is responsible for paying the check? a. Only Ellen b. Both Ellen and State Bank c. Only State Bank d. None of the parties

Q: Elmo pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is a. a cashier's check. b. an overdraft. c. a stale check. d. a stop-payment order.

Q: Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. Like most checks, this check is a. a one-party instrument. b. a nonnegotiable instrument. c. a special type of draft. d. not a substitute for cash.

Q: Martha has a checking account with Homeplace Bank. Martha signs a check "payable to Phillipa" drawn on Martha's account. Homeplace Bank is a. the payer. b. the drawee. c. the drawer. d. the payee.

Q: Albert buys a surround sound system from his neighbor George at George's garage sale. Albert writes George a check for $250 for the sound system. George is a. the certifier. b. the drawee. c. the drawer. d. the payee.

Q: Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in Town Bank to pay her tuition. Rikki is a. the certifier. b. the drawee. c. the drawer. d. the payee.

Q: Scott presents an instrument that states "pay to the order of Scott" to Town Bank for payment. This instrument is the most common type of negotiable instrument, which is a. a commercial wire transfer. b. a check. c. a note. d. a substitute check.

Q: Kris presents an instrument that states "pay to the order of Kris" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is a. a commercial wire transfer. b. a check. c. a debit card transaction receipt. d. a cash transaction

Q: Ian buys a cell phone in Jiffy Mart, using the means that accounts for more retail payments than any other. This means of payment is a. a commercial check. b. a debit card. c. a personal check. d. a cash.

Q: Stored-value cards are a form of digital cash.

Q: Gaining unauthorized access to an electronic fund transfer system is a felony.

Q: A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors.

Q: If a customer's debit card is lost or stolen, the customer will not be liable for any unauthorized use of the card.

Q: A point-of-sale system is a type of electronic fund transfer system.

Q: Banks can replace original with substitute checks.

Q: A substitute check is a paper reproduction of the front and back of an original check.

Q: Today, most checks are processed manually.

Q: The Federal Reserve System acts as a clearinghouse where banks exchange checks.

Q: Each bank in a collection chain must pass a check on before noon of the day of its receipt.

Q: Under the Check Clearing in the 21st Century Act, a bank has to credit a customer's account as soon as the bank receives the funds.

Q: The first bank to receive a check for payment is the depositary bank.

Q: A forged indorsement does not transfer title.

Q: A customer must examine a bank statement and report any discovered forged signature to recover from the bank for the forgery.

Q: A bank cannot recover from a party who cashes a check bearing a forged drawer's signature once the bank has accepted and paid the item.

Q: A bank that pays a customer's check with a forged drawer's signature can generally pass the loss onto the customer.

Q: A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.

Q: A bank is not responsible for determining whether a signature on a customer's check is genuine.

Q: The incompetence of a customer revokes a bank's authority to pay an item.

Q: A bank may not pay any checks on a customer's account after the date of the customer's death.

Q: A bank may contractually shift to the customer the risk of forged checks created by the use of facsimile or other nonmanual signatures.

Q: A customer has a right to stop payment on a check that has been certified or accepted by a bank.

Q: A written stop payment order is valid for only thirty days.

Q: An oral stop payment order is valid for fourteen days.

Q: A bank is not obligated to pay an uncertified check presented less than six months from its date.

Q: A bank has no right to charge a customer's account for the amount of a stale check.

Q: Commercial banking practices consider a check that has been outstanding for three months to be a stale check.

Q: A customer who writes a bad check may be subject to criminal prosecution.

Q: If a customer does not have sufficient funds to pay a check available in his or her checking account and the bank dishonors the check, the bank is liable to the customer.

Q: The rights and duties of a bank and its customer are contractual.

Q: When a customer deposits cash into a checking account, he or she becomes a debtor for the amount deposited.

Q: A certified check is a check that has been signed by a notary public.

Q: A check is a special type of draft.

Q: A check is not a substitute for cash.

Q: The Uniform Commercial Code governs checks.

Q: A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

Q: The good faith requirement applies to both the holder and the transferor.

Q: A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.

Q: A holder takes an instrument for value if he or she gives a check as payment for it.

Q: A special indorsement names the indorsee.

Q: An instrument "payable to bearer" is negotiated by delivery.

Q: An instrument "payable to bearer" is transferable but not negotiable.

Q: A check "payable to the order of bearer" is neither an order instrument nor a bearer instrument.

Q: A bearer instrument is an instrument that does not designate a specific payee.

Q: A maker of an instrument that is payable at a definite time does not have the option of paying before the stated date.

Q: A check is not negotiable if it is payable on demand.

Q: Instruments that say nothing about when payment is due are payable on demand.

Q: An instrument payable "with ten hours of services" is negotiable.

Q: To be negotiable, an instrument must be payable in a fixed amount.

Q: Stating on an instrument the underlying terms of an agreement renders the instrument nonnegotiable.

Q: An instrument that states simply "I.O.U." is not negotiable.

Q: Rubber stamp signatures can be legally binding signatures.

Q: A signature must be the full name of a party.

Q: A promissory note can be a negotiable instrument.

Q: On a trade acceptance, the drawer is also the payee.

Q: A personal check cannot be a negotiable instrument.

Q: A time draft is payable on sight.

Q: Commercial Credit Company has in its possession an instrument dated May 1, 2012. The instrument is payable to the order of Alpha Company "on June 1, 2013," for $5,000. In the upper left corner is an address for Beta Corporation10 Corporate Park Avenue, Chicago, Illinoisand 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, 2012." On the back is the signature of "Alpha Company By Gail, President." Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?

Q: 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' 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?

Q: Burt, a mentally impaired person, is asked by Carl to sign a piece of paper that Carl says is an autograph book. In fact, the document is a note. If later sued on the note by an HDC a. Burt must pay the note. b. Burt's best defense would be fraud in the execution. c. Burt's best defense would be fraud in the inducement. d. Burt's best defense would be mistake.

Q: Opalina asks Paolo, who does not understand English, to sign what Opalina says is an application to open a bank account. In fact, the "application" is a note. If sued on the note by an HDC a. Paolo must pay the note. b. Paolo's best defense would be fraud in the execution. c. Paolo's best defense would be fraud in the inducement. d. Paolo's best defense would be mistake.

Q: Cash National Bank is an HDC of a note for $1,000 on which there is the forged signature of "Dudley." If sued on the note by Cash a. Dudley must pay the note. b. Dudley's best defense would be fraud in the execution. c. Dudley's best defense would be material alteration. d. Dudley's best defense would be forgery.

Q: Jackson pays Phil in good faith for a promissory note. Phil warrants that the draft has not been altered. This warranty is a a. presentment warranty. b. consideration warranty. c. conditional warranty. d. fixed warranty.

Q: Ada is the maker of a note, on which Bart is secondarily liable. Cash & Credit Company (C&C) is the current holder of the note. Bart will be obligated to pay the note if a. Ada defaults on the note. b. C&C breaches a transfer warranty. c. C&C negotiates the note to Delta Collection Agency, a third party. d. C&C presents the note for payment.

Q: 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 a. nothing. b. primary. c. secondary. d. conditional.

Q: Rubin writes a check drawn on his account at Clearwater Bank and payable to the order of Gwyn. The bank does not pay the check. Rubin is a. absolved of liability on the check. b. liable to Gwyn for the amount of the check. c. liable to the bank for the amount of the check. d. entitled to payment of the amount of the check from Gwyn.

Q: Stature Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Stature takes it a. an unreasonable time after its due date. b. before its due date. c. on its due date. d. without noticing its due date.

Q: Dewey is the payee for a check written by Fred. Cash Credit Corporation (CCC) accepts the check from Dewey as part of a payment. CCC cannot become a HDC if a. the check has been transferred more than once. b. the check has been outstanding for one week. c. the check has been outstanding for more than ninety days. d. there are bankruptcy proceedings against Fred.

Q: Wilson buys a promissory note from Oli. The note is due on December 5. December 5 is a Sunday. The note is a. payable anytime the week of December 6. b. payable December 6. c. payable on December 5 only. d. defective.

Q: Elinor performs ten hours of house cleaning for Zack in exchange for a promissory note for $400. At the time that Elinor accepts the note, she is aware that bankruptcy proceedings are being filed against Zack. Elinor a. can obtain HDC status. b. cannot obtain HDC status, because she knows that there are bankruptcy proceedings against Zack. c. cannot obtain HDC status, because she did not fulfill the value requirement. d. cannot obtain HDC status, because she did not fulfill the good faith requirement.

Q: Jill, in good faith and for value, gets from Kiley a negotiable bearer instrument. Jill does not know that Kiley stole the instrument. Jill is a. an HDC. b. not an HDC, because Kiley did not acquire the instrument for value. c. not an HDC, because Kiley did not acquire the instrument in good faith. d. not an HDC, because the instrument is a bearer instrument.