Q&A Hero

Q: In general, the material alteration of a completed negotiable instrument: A. is a complete defense against a holder in due course. B. is no defense whatsoever against a holder in due course. C. means that a holder in due course can enforce the instrument against the maker, but only according to its original tenor. D. means that a holder in due course can enforce the instrument as modified.

Q: In which of the following situations has the holder of a negotiable instrument not given value for it? A. Where the holder takes the instrument as security for an antecedent claim. B. Where the holder gives a negotiable instrument in return for the one received. C. Where the holder receives the instrument as a gift. D. Where the holder acquires a security interest in the instrument.

Q: A check becomes overdue: A. 30 days after its date. B. 60 days after its date. C. 90 days after its date. D. after a "reasonable" period of time, in the light of trade practice.

Q: If a negotiable instrument is payable on demand, it is overdue: A. the day before the demand for payment has been made. B. 30 days after the demand for payment has been made. C. the day after demand for the payment has been made in a proper manner. D. the week after payment has been demanded.

Q: A _____ is a claim of the person obligated on the instrument against the original payee of the instrument. A. real defense B. personal defense C. claim in recoupment D. claim to an instrument

Q: A _____ indorsement can be used with either a blank indorsement or a special indorsement. A. rebuttal B. conditional C. qualified D. restrictive

Q: The negotiation of an instrument made in breach of duty is subject to _____ before the instrument has been negotiated to a transferee who can qualify as a holder in due course. A. rescission B. remission C. restitution D. reformation

Q: A holder in due course does not take free of the _____, which go to the validity of the instrument or of claims that develop after he becomes a holder. A. personal defenses B. relative defenses C. procedural defenses D. real defenses

Q: UCC section 2-302(a)(1) states that in order for an individual to become a holder in due course the instrument must not on its face do what? A. appear to be a forgery B. written in a language other than English C. have the signature of a foreigner D. be on any other color paper than white

Q: Ordinary nonphysical and nonviolent duress that causes the transfer of a negotiable instrument: A. prevents its negotiation. B. is a good defense against a holder in due course of the instrument. C. is subject to rescission before the instrument is transferred to a holder in due course. D. is a good defense against the maker of a note.

Q: A _____ indorsement is one where the indorser disclaims her liability to make the instrument good if the maker or drawer defaults on it. A. special B. conditional C. qualified D. blank

Q: _____ indorsements indicate that they are effective only if the payee satisfies a certain state. A. Special B. Conditional C. Qualified D. Blank

Q: Which of the following indorsements is a blank indorsement? A. "For Deposit Only" B. "Mel Gibbs" C. "Pay to Jack Black in Trust for Mel Gibbs" D. "Pay to the Order of Jack Black, Mel Gibbs"

Q: Which of the following indorsements is a restrictive indorsement? A. "Pay to Jack Black, Mel Gibbs" B. "Mel Gibbs" C. "Pay to Jack Black in Trust for Mel Gibbs" D. "Pay to the Order of Jack Black, Mel Gibbs"

Q: A person who takes an instrument containing a restrictive indorsement, "Pay to Jack Black in Trust for Mel Gibbs,": A. may not pay the proceeds to the indorsee without the due approval of the indorser. B. may pay the proceeds to the indorsee paying due regard to whether the indorsee violates a fiduciary duty to the indorser. C. may pay the proceeds to the indorsee without regard to whether the indorsee violates a fiduciary duty to the indorser. D. may pay the proceeds to the indorser only with the approval and concurrence of the indorsee.

Q: The new revision of Article 3 no longer considers _____ as restrictive indorsements. A. indorsements for deposit B. conditional indorsements C. indorsements directing the indorsee to act for someone else's benefit D. indorsements for collection

Q: Which of the following is an example of restrictive endorsements recognized under Article 3? A. "Pay to Bruce Zucker in Trust for Jay Zucker." B. "Pay to Bruce Zucker Only." C. "Pay to Jay Zucker on the condition that he completes construction on my house by November 1, 2012." D. "Pay to the order of my account."

Q: When a holder makes a blank indorsement of a negotiable instrument that is bearer paper, what legal effect does this have? A. There is no effectbearer paper does not need to be indorsed. B. The bearer negotiates it by transfer alone and no further indorsement is necessary for negotiation. C. The instrument is no longer negotiable, as it has been altered. D. The instrument is converted into order paper.

Q: An instrument that is indorsed with a _____ indorsement remains "order paper." A. special B. blank C. restrictive D. conditional

Q: Which of the following indorsements is a special indorsement? A. "For collection only" B. "Mel Gibbs" C. "Pay to Jack Black in Trust for Mel Gibbs" D. "Pay to the Order of Jack Black, Mel Gibbs"

Q: When a customer deposits a check to her account without an indorsement, then the bank: A. puts the sign of the manager under the typed name of the customer. B. signs the customer's name. C. stamps the name of the bank on the check to cover for the customer's signature. D. stamps on it that it was deposited by the customer.

Q: If an order instrument is transferred without indorsement, then the instrument: A. is deemed to have been negotiated and the bank can qualify as a holder. B. has not been negotiated and the transferee cannot qualify as a holder. C. is deemed to have been negotiated and the transferee can qualify as a holder. D. has been transferred and the bank and the transferee can qualify as a holder.

Q: The transfer of an instrument: A. vests in the transferee any right of the transferor, to enforce the instrument. B. bars the transferee from attaining the rights of the transferor. C. vests in the payor any right of the transferor, to enforce the instrument. D. bars the transferor to pass on his rights to the transferee.

Q: Ahmed Cohen received a check for $5,000 for a used car he sold. The check was marked "pay to the order of Ahmed Cohen." On back of this check he wrote, in his handwriting, "Ahmed Cohen." This has the legal effect of: A. making this instrument nonnegotiable. B. making this instrument void. C. making this instrument order paper. D. making this instrument bearer paper.

Q: If a check is drawn "Pay to the order of Maria" and Maria indorses it "pay to the order of Jay, Maria." This falls under: A. blank indorsement. B. restrictive indorsement. C. special indorsement. D. simple indorsement.

Q: _____ is defined to mean "a signature (other than that of a maker, drawer or acceptor) that alone or accompanied by other words, is made on an instrument for purpose of (i) negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring indorser's liability on the instrument." A. Indemnification B. Recoupment C. Indorsement D. Ratification

Q: If the holder's name on an instrument is misspelled or wrong, then the indorsement: A. can be made only in his name. B. can be made only in the name that is on the instrument. C. can be made either in his name or in the name that is on the instrument. D. can be made by putting his name as well as the name that is on the instrument.

Q: Jackie Collins is issued a check payable to the order of Jacky Collens. She takes the check to the bank. In order to cash the check she has to: A. sign either Jackie Collins or Jacky Collens. B. sign only Jackie Collins. C. sign only Jacky Collens. D. sign both Jackie Collins and Jacky Collens.

Q: Rachel's father gave her a check drawn on his checking account marked "payable to the order of Rachel Stern." This instrument is order paper, because: A. the instrument uses the word "order." B. the instrument names a specific payee. C. the instrument was properly negotiated to Rachel. D. the instrument was an order to pay cash.

Q: John received a check from his employer marked "pay to the order of John Jones." John used this check to pay for groceries from ABC Foods. He wrote on the back of the check: "pay to ABC Foods, for groceries." Was this check properly negotiated? A. No, because the statement that the check was for payment to ABC Foods defeats this negotiation. B. No, because John did not indorse the check. C. Yes, because John transferred possession of the check and ABC Foods acted in good faith. D. Yes, because a holder's signature is not always needed in order to negotiate a check.

Q: Which of the following is order paper? A. A check made out "to the order of cash." B. A note payable to the order of X and indorsed in blank by X. C. A note made out to Y's order and indorsed "Pay to Z, Y." D. A receipt for a payment made by Z.

Q: Which of the following is bearer paper? A. A check payable to the order of X and specially indorsed to Y. B. A check payable to the order of X and indorsed in blank by X. C. A check payable to the order of cash and specially indorsed by the person who received it. D. A check payable to the order of cash to Y.

Q: A person cannot be a holder in due course of a negotiable instrument if, when she takes it, the instrument is irregular or some important or material term is blank.

Q: Generally, real defenses arise out of the transaction in which the negotiable instrument was issued and are based on negotiable instruments law or contract law.

Q: If an individual holds a note that is labeled consumer paper then that individual cannot be a holder in due course.

Q: Svetlana Mills gives a check "payable to the order of Svetlana Mills," to a shopkeeper for some groceries. Here, the check would be considered as negotiated only upon the fulfillment of which of the following conditions? A. The check should be indorsed by the shopkeeper. B. The check should bear the name of the shopkeeper. C. Svetlana should indorse the check in the name of the shopkeeper. D. Svetlana should indorse the check in her own name.

Q: Under Revised Article 3, a person is a(n) _____ if she is in possession of an instrument that is payable to bearer or made payable to an identified person and she is that identified person. A. payor B. issuer C. bailor D. holder

Q: What section of the UCC defines negotiation of a negotiable instrument and who is a holder? A. 3-201 B. 2-221 C. 1-105 D. 3-401

Q: A person who makes a completely executory promise, in return for a negotiable instrument, has given value for it.

Q: On June 1, Mike writes a check payable to Pete. Without ever being paid, the check is eventually negotiated to Hal, who receives it on September 15, with notice of the date on its face. Hal is not a holder in due course of the check.

Q: Sonia through fraudulent representations induced Gracie to execute a negotiable note payable to Sonia. Sonia is a holder in due course.

Q: A claim in recoupment is a claim of the person obligated on the instrument against the original payee of the instrument.

Q: An individual must be acting in good faith in order to become a holder in due course of a negotiable instrument.

Q: Value is identical to simple consideration.

Q: Indorsements that state a condition to the right of the indorsee to receive payment do not affect the right of the indorsee to enforce the instrument.

Q: A holder in due course of a negotiable instrument always has the same rights as the individual that transferred the negotiable instrument to the holder.

Q: An indorsement is a signature of the holder typically on the back of a check.

Q: Order paper that is indorsed in blank becomes bearer paper.

Q: Anyone other than a bank, who purchases a check indorsed "for deposit only," has converted it; unless the indorser received the amount paid for the check or the bank deposited the check in the indorser's account.

Q: The new Article 3 recognizes and enforces indorsements that prohibit further negotiation of the instrument.

Q: In qualified indorsement, the indorser accepts the liability to make the instrument good, if the maker or drawer defaults on it.

Q: An instrument that is payable "to cash" can be negotiated simply by giving it to the person to whom you wish to transfer it.

Q: Under the most modern revision to Article 3, a depositary bank cannot become a holder of a check that is deposited by a customer without an indorsement.

Q: A check is a contract for money that is payable on demand.

Q: If a note or draft contains a conspicuous statement that the promise or order is not negotiable, it is not a negotiable instrument even if it meets the test for negotiability.

Q: In some circumstances, Article 3 allows a person to become a holder by negotiation, though the transfer of possession is involuntary.

Q: Negotiation, as defined by the UCC in section 3-201, is the transfer of a negotiable instrument by one person to another person.

Q: Jim Stanley writes a check on his checking account with a bank. The bank is the drawee here.

Q: Kathy writes a check on her checking account with a bank. Kathy is the payee here.

Q: A cashier's check is a check for which the same bank is both drawer and drawee.

Q: A promissory note is a credit instrument.

Q: If a bank maintains an electronic deposit and provides the customer with a statement indicating the amount of principal held on a certificate of deposit (CD), such a CD is negotiable.

Q: To be negotiable, an instrument must be payable on demand or at a definite time. Under this test, how does the law treat instruments that do not state any time for payment?

Q: The drafters of Revised Article 3 created a new and significant exception to the requirement that to be negotiable, an instrument must be payable to order or to bearer. What is it?

Q: In 1990, Revised Article 3 of the UCC was developed, which now has been adopted by all the states.

Q: There are two types of negotiable instruments.

Q: Commercial paper is a form of contract involving the paying of money.

Q: What section of the UCC covers how to deal with conflicting and ambiguous terms in a check? A. 3-114 B. 3-102 C. 2-104 D. 9-331

Q: What is term for a clause that authorizes a creditor to go into court if the debtor defaults and to have a judgment entered against a debtor without a trial? A. Power of Attorney B. Articles of Incorporation C. Commerce treaty D. Confession of Judgment

Q: Alice writes a check "Pay to the order of Caleb." The check is drawn on the Berkley's Bank. Who are the drawer, the drawee, and the payee on this instrument? Why is this check called order paper?

Q: Why does negotiability matter? Hint: To what is negotiability a prerequisite? Furthermore, why does this matter? Also, why is it important to society?

Q: What are the conditions necessary for a person to be able to accept a negotiable instrument as a substitute for money?

Q: A(n) _____ can be negotiated or transferred by delivery of possession without indorsement. A. order paper B. bearer paper C. cashier's check D. teller's check

Q: Which of the following is the order of priority in case of an internal conflict in a negotiable instrument? A. Typewritten terms beat printed terms, which beat handwritten terms. B. Printed terms beat typewritten terms, which beat handwritten terms. C. Handwritten terms beat printed terms, which beat typewritten terms. D. Handwritten terms beat typewritten terms, which beat printed terms.

Q: Clint wrote a check to pay for his phone bill. The amount of the bill was $50. He wrote out the words "Fifty dollars only" but he also wrote "$60" in the area for numbers. As a result, the check: A. is disqualified as a negotiable instrument. B. qualifies as a negotiable instrument, and the payee can collect $50. C. qualifies as a negotiable instrument, and the payee can collect $60. D. is disqualified as a negotiable instrument, unless Clint's intent is ascertained.

Q: Except for _____, to be negotiable an instrument must be "payable to order or to bearer." A. promissory notes B. bonds C. checks D. certificates of deposit

Q: Which of the following can be negotiated or transferred only by indorsement? A. Order paper B. Bearer paper C. Cashier's check D. Teller's check

Q: Which of the following is nonnegotiable? A. A check written "Pay James Watson." B. A note written "I promise to pay James Watson." C. A note written "I promise to pay James Watson or bearer." D. A draft payable "to the order of bearer."

Q: Carl writes a check made payable to "Patricia Sullivan or William Hayes." Who may negotiate the check? A. Neither Patricia nor William: The check is unenforceable. B. Patricia as she is the first named party to whom the check is made payable. C. William as he is the last named party to whom the check is made payable. D. Either Patricia or William may negotiate the check.

Q: Which of the following instruments is nonnegotiable? A. "I promise to pay to the order of Carol Reed $40, Jerry Jacobs." B. A statement in the instrument that it was given in payment of the previous month's rent. C. A statement in the instrument that it was given in payment of the purchase price of goods. D. "I promise to pay to the order of Meg Raven, at my option, $100 or five baskets of oranges, Dan Gilbert."