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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 claim in recoupment is a claim of the person obligated on the instrument against the original payee of the instrument.
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:
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 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:
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:
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:
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:
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:
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:
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 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:
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:
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:
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:
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 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."
Q:
The rate of interest that courts impose on losing parties until they pay the winning parties is known as a(n):
A. variable rate.
B. order rate.
C. judgment rate.
D. fixed rate.
Q:
Marion purchased a digital camera, paying with a promissory note. The note stated that Marion promised to pay $300 (the purchase price of the camera) in 10 monthly installments of $30 plus interest. Payments are due on the first day of each month, starting in January 2010. The interest is to be calculated as "three percent over the Chase Manhattan Prime Rate." Is this instrument negotiable?
A. No, because the future prime rate is not known at the time of the making of the note.
B. No, because the note does not describe a fixed amount of money to be paid.
C. Yes, because the variable rate of interest is calculated by reference to an index.
D. Yes, because the future prime rate is known at the time of the making of the note.
Q:
Which of the following is nonnegotiable?
A. A note that does not state any other undertaking by the person promising to do any act in addition to the payment of money.
B. A draft payable "15 days after sight."
C. A note with a clause permitting the time for payment to be accelerated at the option of the maker.
D. A note that is payable "when the interest rate on 30-year treasury bonds reaches 10 percent."
Q:
An instrument payable on demand is:
A. not payable before the date of the instrument.
B. payable before the date of the instrument.
C. not payable after the date of the instrument.
D. nonnegotiable without a date.
Q:
Which of the following is true if an instrument is undated?
A. Its date is the date it is signed by the maker or the drawer.
B. Its date is the date it is issued by the maker or the drawer.
C. Its date is the date it is received by the payee.
D. The instrument is nonnegotiable if it is undated.
Q:
The requirement that, to be negotiable, an instrument must promise or order payment of a fixed amount of money applies:
A. only to principal.
B. only to interest.
C. to both principal and interest together.
D. neither to principal nor interest.
Q:
If the description of interest in the instrument does not allow the amount of interest to be ascertained, then interest is payable at the:
A. variable rate.
B. judgment rate.
C. order rate.
D. fixed rate.
Q:
Payments made with a credit card and payments made with a debit or ATM card are subject to:
A. both the federal law and the state law.
B. only federal laws.
C. only state laws.
D. only local laws.
Q:
Traveler's checks commonly require, as a condition to payment, a countersignature of a person whose specimen signature appears on the draft. Traveler's checks are:
A. voidable.
B. negotiable.
C. nonnegotiable.
D. unenforceable.
Q:
The Code determines negotiability at _____, so that indorsements do not affect the underlying negotiability of the instrument.
A. precompliance
B. abeyance
C. issuance
D. disaffirmance
Q:
Which of the following is a negotiable instrument?
A. "I owe you $100."
B. "I promise to repay the loan of $3,000 only if I succeed in my business."
C. "I promise to pay you the sum of $300 in the next week."
D. "Please pay the bearer the amount of $500."
Q:
Which of the following would be a nonnegotiable instrument?
A. "Payment is subject to the terms of a mortgage dated August 12, 2011."
B. A statement in the instrument that it was given in payment of last month's rent.
C. A statement in the instrument that it was given in payment of the purchase price of goods.
D. "This note is secured by a mortgage dated January 13, 2011."
Q:
A conditional indorsement:
A. destroys the negotiability of the instrument.
B. does not destroy the negotiability of an otherwise negotiable instrument.
C. validates the instrument.
D. does not destroy the negotiability of the instrument but invalidates it.
Q:
A check is NOT negotiable if it:
A. reads "Pay Kim Turner."
B. states that it is payable only on a certain condition.
C. is signed with a rubber-stamped signature.
D. is issued by a drawer who lacks capacity to contract.
Q:
A person creates a handwritten instrument in pencil on a piece of wrapping paper. The instrument is:
A. negotiable even though it is handwritten.
B. nonnegotiable because it is handwritten.
C. nonnegotiable since it is written on a piece of wrapping paper.
D. void.
Q:
To qualify as a negotiable instrument, an instrument in the form of a note must be signed by the:
A. payee.
B. drawee.
C. assignee.
D. maker.
Q:
Which of the following statements will cause an instrument to be nonnegotiable?
A. "Payment is subject to the terms of a mortgage dated August 30, 2005."
B. "Payment is secured by a mortgage dated August 30, 2005."
C. "Payment is in consideration of two months' rent."
D. "Payment to be made 30 days after date, for a note dated August 30, 2005."
Q:
Tim contracts with Home Dairy to deliver a bottle of milk to Tim's house every day. Home Dairy assigns Tim's contract to Mother Dairy. Tim is notified of the change and continues to get his daily bottle of milk. His contract is now with the new dairy. Mother Dairy is the:
A. assignee.
B. factor.
C. holder in due course.
D. assignor.
Q:
A holder in due course of a negotiable instrument takes the instrument free of all defenses to the instrument except those that concern its:
A. validity.
B. reliability.
C. adaptability.
D. collectibility.
Q:
A holder in due course is subject to the defense of _____ if the maker of a note wrote it under a threat of force.
A. fraudulent inducement
B. infancy
C. duress
D. breach of warranty
Q:
The _____ has adopted a regulation that alters the rights of a holder in due course in consumer purchase transactions.
A. Securities and Exchange Commission
B. Consumer Product Safety Commission
C. Bureau of Consumer Financial Protection
D. Federal Trade Commission
Q:
What is the term for an instrument containing both an acknowledgement by a bank that it has received money and a promise to repay money?
A. Commerce treaty
B. Articles of Organization
C. Certificate of Deposit
D. Escrow
Q:
Three of the following render an instrument nonnegotiable; one does not affect negotiability. Which of the following does NOT affect negotiability?
A. A draft that says: "Pay to the order of Sue Smith once she repairs my computer."
B. An instrument that says only: "This confirms my $1,000 debt to Sue Smith."
C. A note that says: "Payment is conditional upon the terms of the mortgage between the parties dated June 1, 2000."
D. A notes that says: "This note is secured by the property described in the parties' mortgage of June 1, 2000."
Q:
A check drawn by a credit union on its account at a federally insured bank would be an example of a:
A. cashier's check.
B. teller's check.
C. counter check.
D. traveler's check.
Q:
A _____ check is a draft on which the drawer and drawee are the same bank (or branches of the same bank).
A. cashier's
B. teller's
C. certified
D. traveler's
Q:
A check or draft that one bank draws upon another bank is called a:
A. certified check.
B. cashier's check.
C. teller's check.
D. bearer check.
Q:
If Viola owes Tina money, Tina may frame a document for the amount of the debt, naming Viola as drawee and herself or her bank as payee, and send the document to Viola's bank for payment. This document is a:
A. promissory note.
B. certificate of deposit.
C. draft.
D. bond.
Q:
Melissa Seles has a checking account at the Union Bank of New York. She goes to Home Depot and agrees to buy a room heater priced at $200. She writes a check to pay for it. The Union Bank of New York is the:
A. bearer.
B. drawer.
C. payee.
D. drawee.
Q:
Selena Johnson has a checking account at the Union Bank of New York. She goes to Home Depot and agrees to buy a room heater priced at $200. She writes a check to pay for it. Home Depot is the:
A. payer.
B. drawer.
C. payee.
D. drawee.
Q:
Shania Watson has a checking account at the Capital Bank of New York. She goes to Lowe's and agrees to buy an electric water heater priced at $700. She writes a check to pay for it. Shania is the _____ of the check.
A. payer
B. drawer
C. payee
D. drawee
Q:
The term commercial paper is defined as?
A. A contract for the payment of money.
B. An agreement between nations for the benefit of commerce.
C. A receipt of goods barter between businesses.
D. A warranty on good shipped in international commerce.