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Q:
Under liability insurance, the insurer is liable for damages up to the limit of the insurance purchased.
Q:
If Viva has low income she will qualify for Medicare, a federally funded health insurance program.
Q:
To avoid risk while waiting for an insurance policy to be formally accepted, an insured may choose to have the insurer issue a binder to provide interim coverage.
Q:
If an insured person becomes disabled, he or she will be excused from paying premiums if he or she has purchased a waiver-of-premium option.
Q:
The cash surrender value of life insurance equals the face value of the policy at the age of ninety-five or hundred years.
Q:
During inflationary times, when bank interest rates are high, insurance policies are usually poor sources for loans at low interest rates.
Q:
Decreasing term insurance reduces the premium over time.
Q:
An individual takes out a typical life insurance and commits suicide three years later. The beneficiary may collect the insurance.
Q:
Tia is severely injured in an auto accident and dies four months later from these injuries. Her beneficiaries may collect under a double indemnity provision.
Q:
Johnny pays $600 for six months of automobile insurance. This payment is called the policy.
Q:
A policy is an unconditional promise to pay money.
Q:
Ted, one of the consultants in a two-man business, cannot take life insurance on his business partner, Brendan, because he does not have an insurable interest in Brendan's life.
Q:
Insurance companies have the right to step into the shoes of the party they compensate and sue any party whom the compensated party could have sued.
Q:
Carl takes out insurance on his life and names a homeless stranger, Troy, as beneficiary. Troy can collect the life insurance when Carl dies.
Q:
Josie writes a check on January 15 to Rusty Enterprises but later realizes that the merchandise she purchased was of poor quality. She gives a stop payment order to the bank on January 20. Her bank has the check in its possession and is accepting it as she completes her stop payment order. Her bank pays the check and Josie demands that her account be recredited. Discuss the legal aspects of this situation.
Q:
Dreamwork Bank uses the substitute check procedure to rapidly obtain payment of items deposited by its customers. An employee of the bank fraudulently alters some substitute checks so they are for greater amounts than the original paper check and embezzles the difference. Discuss the bank's warranties in this situation.
Q:
Jill's account with Small Bank is improperly charged with a $3,000 substitute check that was actually Bob's check drawn on Small Bank. Discuss Jill's legal rights and what she must do to rectify this situation.
Q:
Al is considering making a purchase from an online merchant. Discuss the relative advantages Al has if she uses a credit card or a debit card for the purchase.
Q:
Insurance is a transfer of the risk of economic loss from the insured to the insurance company.
Q:
Oliver wrote a check to Greg Motors for $4,000 drawn on Uphill Bank in payment for a secondhand car. Greg Motors deposited the check in its account at Seventh Day Bank, which sends the check to Uphill Bank for collection. Oliver's car broke down before he reached home that evening, and he contacted his bank to stop payment on the check. Discuss what Uphill bank must do with the check to ensure a stop payment.
Q:
The Identity Theft Penalty Enhancement Act added a new crime called _____ to the original statute.
A. aggravated identity theft
B. fraudulent misrepresentation
C. uttering
D. identity violation
Q:
Small Bank mistakenly dishonors a $5,000 check written by its customer Wanda to Hyram Real Estate as a down payment for a new home. As a result of the dishonor Wanda's closing is delayed by thirty days. She incurs $500 extra rental expenses, $1000 in attorney's fees and home mortgage interest rates increase by one half percent before her closing. Hyram deposited the $5,000 check in its account and suffered $300 in NSF charges when credit for the deposit was withdrawn. Discuss the liability of Small Bank to Wanda and Hyram.
Q:
Ashton Bank knows that its customer, Juan, has died. One day after Juan's death, Ashton Bank was presented a check for clearing of $3000. The check was written by Juan a week prior to his death to Bailey Enterprises. Discuss the legal rights of Bailey Enterprises.
Q:
Chambers wrote out a check to Smith for $300. Smith attempted to cash the check at Chambers's bank, but the bank refused to honor it even though there was enough money in Chambers's account. Can Smith sue the bank for refusing to honor the check? Explain.
Q:
While cleaning out her desk, Chen found a certified check she had received eight months earlier and had forgotten to cash. When she brought the check to the bank on which it was drawn, the bank refused to cash it. Discuss the legal rights of the parties in this case.
Q:
Linda's checkbook is stolen on January 1 and three checks are forged on her account at Strata Bank. This first appears on a bank statement delivered to her on February 15 but Linda does not examine the statement until March 5. She reports the forgery to the bank on March 6. The other two forged checks do not appear on other bank statements until April 15 and Linda reports them to the bank on April 20. Discuss the case,
Q:
If a bank uses a substitute check it makes which of the following warranties?
A. It is not a legal equivalent of the original check.
B. It contains an accurate image of the front and back of the original check.
C. The drawer, indorser, or the depositary bank will be asked to pay a check that has already been paid.
D. Original checks have to be presented to the drawee bank for payment.
Q:
A consumer has the right to claim an expedited credit if the customer asserts in good faith that:
A. the bank charged the consumer's account for a substitute check that was not given to the consumer.
B. the check was not properly charged to the consumer's account.
C. the consumer did not suffer a resulting loss.
D. the production of another substitute check is necessary to determine the validity of any claim.
Q:
Tammy's ATM card is stolen. If she notifies the issuer of the card of the theft within two business days of theft, Tammy will be liable for:
A. $50 of unauthorized use.
B. $100 of unauthorized use.
C. $500 of unauthorized use.
D. $1000 of unauthorized use.
Q:
_____ is a system in which funds are electronically transferred from a customer's checking account, eliminating the need to process a paper check.
A. Electronic fund transfer
B. Electronic check transfer
C. Electronic check conversion
D. Electronic teller system
Q:
Planter, Inc., sold $100,000 in plants and plant supplies to the Ace Corporation. When the supplies were delivered to Ace, Ace ordered its bank, Fourth National, to pay $100,000 to Planter. Fourth National debited Ace's account and ordered Chase Superior, Planter's bank, to credit Planter's account for $100,000. In this transaction:
A. Planter is the originator and Ace is the beneficiary.
B. Ace is the originator and Chase Superior is the beneficiary.
C. Ace is the originator and Planter is the beneficiary.
D. Fourth National is the beneficiary and Chase Superior, the originator.
Q:
The absolute time limit for notifying a bank of a forged or altered check is _____ from the time the depositor receives the bank statement.
A. fourteen days
B. thirty days
C. one year
D. three years
Q:
Winston was going to be out of town on September 1, when his rent would be due. On August 20 he gave his landlord Becky a check dated September 1, with instructions not to deposit or cash the check until September 1. As the instructions to Becky were clear he did not notify the bank of the postdated check. On August 21 Becky deposited the check in her account at her bank and the check was dishonored on August 23. Which of the following is true of this scenario?
A. Winston has recourse against Becky as she did not follow his instructions.
B. Winston has recourse against Becky and the bank since it failed to refuse the item when deposited.
C. Winston has recourse against the bank as it failed to notify Winston of the check acceptance and failed to refuse the item when deposited.
D. Winston did not notify the bank not to pay it before the date on the check, hence has no recourse.
Q:
A stop payment ordered by a drawer is valid:
A. for 30 calendar days only, if the order was made orally.
B. if it is received in time and in such a manner as to afford the bank a reasonable opportunity to act on it.
C. for only one year, unless renewed in writing.
D. only on limited items payable on his/her account, and cannot be used for checks with a value of $500 and above.
Q:
The first bank to which an item is transferred for collection is called a(n) _____ bank.
A. local
B. remitting
C. depositary
D. intermediary
Q:
If a bank pays a check in cash to the payee, and the check is returned to the drawer with the next bank statement, the bank's settlement is said to be:
A. provisional.
B. final.
C. in due course.
D. honored.
Q:
Omar receives a check from Trudy drawn on Shelfari Bank. Shelfari Bank improperly dishonors the check when Omar attempts to cash it. Which of the following is true of this case?
A. Omar is the holder or the check, and hence has recourse against Trudy, the drawer.
B. Shelfari Bank, the drawee bank, is liable to Omar, the holder, for improperly dishonoring the check.
C. Omar has recourse against both the parties - the drawer, Trudy, and the drawee bank, Shelfari Bank.
D. Omar has recourse against Shelfari Bank, in case Trudy does not reimburse Omar.
Q:
Kelley offers Hamilton a $20,000 check which she knows has been forged. Her offer is best known as:
A. chiseling.
B. uttering.
C. altering.
D. remitting.
Q:
How does a bank verify the signature of its customers?
A. By the substitute check held by the bank for reference purposes.
B. By the signature card filled in by the customer when the account is opened.
C. By the signature provided in documents such as passports, ID cards, etc.
D. By the pin number provided by the bank with the ATM card.
Q:
Jodie deposits in her checking account a $527 check made payable to her from the Internal Revenue Service. When will the $527 be made available to her?
A. Within seven business days of the date of her deposit.
B. Within three business days of the date of her deposit.
C. Within ten business days of the date of her deposit.
D. The next business day following the date of her deposit.
Q:
Which of the following is true of a bad-check statute?
A. The payee does not have the obligation of informing the drawer of the nonpayment of the check.
B. Bad-check statutes are effectively used as a means of collection.
C. The payee can prosecute the drawer immediately after being notified of a bad check by the drawee bank.
D. The drawee bank can prosecute the payee in case of dishonor of a check.
Q:
Cindy's liability for the unauthorized use of her ATM card is limited to $500 if she notifies the bank after 2 business days but within one week after the loss of the card.
Q:
A business receiving money by electronic transfer is known as the beneficiary.
Q:
The Electronic Fund Transfer Act applies to transactions between banks and businesses.
Q:
Which of the following is true of the relationship between the drawee bank and its customer?
A. The drawee bank becomes a creditor and the customer becomes a debtor at the time of opening a checking account.
B. The drawee bank becomes an insurer and the customer the insured at the time of opening a checking account.
C. The drawee bank becomes the customer's debtor at the time of opening a checking account and agent while collecting checks.
D. The drawee bank becomes a debtor to the customer when the bank pays more than the customer has on deposit.
Q:
Chuck deposits his paycheck drawn on Big Bank at Small Bank and his account is credited with this deposit. Three days later Chuck is notified by Small Bank that his paycheck has been dishonored by Big Bank due to insufficient funds and the amount of the check has been deducted from Chuck's Small Bank account. Which of the following is true of this situation?
A. Any settlement by Small Bank is provisional and may be rescinded if the paycheck is dishonored.
B. Small Bank acted too slowly and did not comply with the prescribed schedule of Regulation CC.
C. Big Bank is the payor bank and hence, must reimburse Small Bank, the depositor bank.
D. Small Bank cannot credit Chuck's account until it is certain that Big Bank will honor the check.
Q:
Which of the following is true of a bank's duty to honor checks?
A. The drawee bank is not under a duty to honor all checks drawn by its customers in presence of sufficient funds in the customers' accounts.
B. If there are insufficient funds on deposit, the bank may charge the customer's account if it does not create an overdraft.
C. If a bank fails to honor a check because of a mistake on its part, the bank is liable to the customer for damages the customer suffers.
D. The drawee bank has a liability to the holder of the check, whether the check is certified or notified.
Q:
A(n) _____ is a check that is presented for payment more than six months after its date.
A. overdraft
B. postdated check
C. antedated check
D. stale check
Q:
In case a check is deposited in the payee's own account in a depository bank, any settlement given by the depository bank is final.
Q:
Under the Check 21 Act, bank customers have an absolute right to see their original canceled checks.
Q:
Expedited credit can be claimed by consumers who have suffered losses related to substitution checks.
Q:
An e-check is sometimes called an electronic check transfer.
Q:
Remitting bank describes any payor or intermediary bank remitting for an item.
Q:
Regulation CC provides the funds availability schedule.
Q:
Ivan receives his Friendly Bank statement on March 1 and reports his forged checks shown on the statement on April 23. Friendly Bank must credit Ivan's account for the forged checks.
Q:
A written stop payment order is effective for six months.
Q:
Janice and her daughter have a joint checking account. The basic insurance coverage by the FDIC can protect this account only up to $100,000.
Q:
An intermediary bank is the first bank to which an item is transferred in the course of collection.
Q:
If Nina, a payee, deposits a check made payable to herself in her own account in a bank that is not the payor bank, any settlement given by the depositary bank is final.
Q:
A bank becomes a creditor when money is deposited in the bank by a customer.
Q:
Julie has a nine month old certified check drawn on Harold Bank. Harold Bank is obligated to pay the check.
Q:
The day grandpa died, he gave a check to Cable Services to pay his cable T.V. bill. If Grandpa's bank knows of his death, it may not pay this check after his death.
Q:
A stale check is a check that is presented for payment more than three months after its date.
Q:
Offering oral statements about the validity of an instrument is known as uttering.
Q:
Shane carefully wrote a check for $300 and gave it to Ethos Art Gallery for the purchase of a painting. Ethos raised the check to read $800. Shane's bank honored the altered check. Analyze the course of actions Shane could take.
Q:
Charles writes a check payable to Jane on his account at Friendly Bank. Friendly accepts the check but subsequently determines that there are insufficient funds in Charles' account to pay the check. Explain what liability Charles has.
Q:
Big Bank is unable to provide notice of dishonor for three days because a fiber optic cable was accidentally cut by a construction worker. Will Big Bank be liable for its failure to act in a timely manner?
Q:
When the bank collects or attempts to collect checks made payable to the customer, it acts as the customer's agent.
Q:
A demand negotiable note for $500 issued by Sabin and given to Norm is altered to read $5,000 and subsequently presented for payment by Bridget, a holder in due course. Discuss the case.
Q:
Tammy purchases a promissory note that has numbers scratched out and rewritten. What legal problem will Tammy encounter in claiming to be a holder in due course of the note?
Q:
LeVoe wrote a check for $1,200 to the order of Henry Smith and delivered it to Smith in payment for a used car that Smith said had a rebuilt engine. Smith indorsed the check and delivered it to Kraus. LeVoe stopped payment on the check when she discovered that the engine had not been rebuilt. Analyze the case.
Q:
Callaghan bought a bedroom set from a furniture store and signed a consumer credit contract agreeing to pay $150 in 12 monthly installments. The furniture store immediately negotiated the credit contract to a finance company, with which it had an arrangement, and received payment. The furniture turned out to be defective. Discuss if Callaghan can use the defense of defective furniture against the furniture store and the finance company for the money owed.
Q:
Ten year old Felicity fell in love with a golden retriever puppy which she saw in the window of Pet World. She decided to use the money she had saved from her paper route to buy the dog and wrote a $300 check, payable to Pet World. Does Pet World qualify as a holder in due course?
Q:
In exchange for some illegal drugs, Popka wrote a $500 check to White. Immediately thereafter, Popka stopped payment on the check. Can White recover the $500 from Popka in court? Explain.
Q:
Mark is mentally incompetent and delights in signing documents. Henry persuades Mark to sign numerous promissory notes which he negotiates. Which of the following is true of this situation? Must Mark pay these notes if they have been held by holders in due course?
A. Mark must pay these notes since duress is not involved.
B. Mark does not have to pay these notes since he has a real defense.
C. Mark must pay these notes since there is a fraud in the inducement.
D. Mark must not pay these notes since no one could anticipate this happening.
Q:
Indorsers are obligated to make the payment only when:
A. the instrument has not been properly presented to the drawee or party obliged to pay the instrument.
B. the instrument is not dishonored.
C. the notice of dishonor is not given to the secondary party within the time and manner mentioned.
D. the instrument has been properly presented to the drawee or party obliged to pay the instrument, and payment must be demanded.
Q:
_____ means a demand made by a holder to pay or accept an instrument.
A. Dishonor
B. Presentment
C. Alteration
D. Real defense
Q:
Dishonor means:
A. fraud in the payment method.
B. deception in the amount of payment.
C. refusal to pay a negotiable instrument.
D. an extension of payment.
Q:
Bob purchases a $1,000 negotiable promissory note from a stranger for $100 that appears to be valid. Will Bob qualify as a holder in due course?
Q:
How is "failure of consideration" and "lack of consideration" related?
A. They are real defenses which can be used against holders in due course.
B. Failure of consideration is a real defense and lack of consideration is a personal defense.
C. Failure of consideration is a personal defense and lack of consideration is a real defense.
D. They are personal defenses which cannot be used against holders in due course.