Chp 13 - Negotiable Instruments

Question 1

A negotiable instrument is a promise by one party to pay a undefined sum of money to another party. There are two parties: the maker and the payee. While the amount to be paid may vary, the date of payment must be set at a specific time in the future.
- True
- False

Answer 1

False

Question 2

A negotiable instrument may be transferred in two basic ways. If the instrument is made “to the order” of the payee, the payee must (1) endorse the instrument and (2) deliver the instrument to a third party. If the instrument is made “to bearer,” the party in possession of the instrument is required only to deliver it to transfer it.
- True
- False

Answer 2

True

Question 3

Negotiable instruments payable “to bearer” are considered the safest form.
- True
- False

Answer 3

False

Question 4

If a commercial instrument is nonnegotiable, it falls under the common law, not the UCC.
- True
- False

Answer 4

True

Question 5

To meet the UCC’s requirements for negotiability, an instrument must be in writing.
- True
- False

Answer 5

True

Question 6

To meet the UCC’s requirements for negotiability, an instrument must be payable to a specific party.
- True
- False

Answer 6

False

Question 7

To be ordinary holder of a negotiable instrument, the holder must give value for it, take it without knowledge that it is overdue or defective, and must take it in good faith.
- True
- False

Answer 7

False

Question 8

Orders to pay include drafts and checks.
- True
- False

Answer 8

True

Question 9

Promises to pay include drafts and checks.
- True
- False

Answer 9

False

Question 10

The party who issues or creates a document that requests payment, probably from a bank, is called the drawer.
- True
- False

Answer 10

True

Question 11

The party who agrees to make a payment to another party, based on a document presented to it, such as a bank, is called the drawee.
- True
- False

Answer 11

True

Question 12

The drawee owes money to the drawer in a negotiable instrument.
- True
- False

Answer 12

False

Question 13

The party to receive a payment from a negotiable instrument is called the payee.
- True
- False

Answer 13

True

Question 14

A check is a draft drawn on a bank and payable on demand.
- True
- False

Answer 14

True

Question 15

A cashier’s check is a form of check in which the bank is both the drawer and the drawee.
- True
- False

Answer 15

True

Question 16

A note involves two parties, the maker and the payee. Payment must be on demand.
- True
- False

Answer 16

False

Question 17

When real estate is used to back up a note, it is called a collateral note.
- True
- False

Answer 17

False

Question 18

When the maker of a note promises to repay the note in specific installments over time, it is a balloon note.
- True
- False

Answer 18

False

Question 19

When the payee is concerned about the quality of a draft, it may be submitted to the drawee for confirmation. That is called an acceptance or bankers’ acceptance.
- True
- False

Answer 19

True

Question 20

The only property that is typically exempt from attachment is personal property worth over $1,000.
- True
- False

Answer 20

False

Question 21

Real estate is typically financed by borrowing money and securing the loan with a mortgage.
- True
- False

Answer 21

True

Question 22

The mortgagee is the creditor who makes a mortgage.
- True
- False

Answer 22

True

Question 23

According to the Statutes of Fraud, mortgages may be either oral or in writing.
- True
- False

Answer 23

False

Question 24

To protect the rights of the mortgagee, a mortgage should be recorded with a state official.
- True
- False

Answer 24

True

Question 25

A mechanic's lien is the most common lien on personal property. - True - False

Answer 25

False

Question 26

A mechanic's lien is also called an artisan's lien. - True - False

Answer 26

False

Question 27

An artisan's (possessory) lien attaches to personal property. - True - False

Answer 27

True

Question 28

A promise to pay a certain sum of money to another party is a type of commercial paper called a(n): - note - check - obligation - promise - draft

Answer 28

note

Question 29

The ____ of a note is the party who promises to pay another party. - marketer - payee - financer - payer - none of the other choices are correct

Answer 29

none of the other choices are correct

Question 30

Promissory notes are instruments that involve ____ parties. - three - four - more than three - five - none of the other choices are correct

Answer 30

none of the other choices are correct

Question 31

When real estate is used as collateral to secure the loan, the note is a: - balloon note - fixed note - property note - landed note - none of the other choices are correct

Answer 31

none of the other choices are correct

Question 32

When a note is to be paid in regular payments but also includes a final payment more than double the regular payments, the note is called: - an installment note - a collateral note - a payee note - a maker note - none of the other choices

Answer 32

none of the other choices

Question 33

A(n) ____ is a legally binding written order to pay a fixed sum of money that involves three parties. - promissory note - real estate mortgage note - draft - easement - balloon note

Answer 33

draft

Question 34

In a suretyship: - a bank immediately accepts the credit of its debtor - the credit of a third party secures a debt - the credit of the debtor is sufficient to secure a debt - a bank takes a property interest in the debtor's real estate - none of these

Answer 34

the credit of a third party secures a debt

Question 35

A guarantor is generally the same as: - the principal - the debtor - the surety - the grantor - the testator

Answer 35

the surety

Question 36

A mortgagor is: - the debtor on a mortgage - the debtor on a contract for purchasing furniture - the creditor on a mortgage - the creditor on a deal with a bank - none of the other choices are correct

Answer 36

the debtor on a mortgage

Question 37

When real estate itself is used to secure a debt obligation it is evidenced by a: - certificate of real estate - draft - lien - credit report - none of the other choices are correct

Answer 37

none of the other choices are correct

Question 38

A mortgage will typically contain: - a description of the property - the amount of debt involved - the state's duties to the mortgagor - a description of the property and the amount of debt involved - a description of the property, the amount of debt, and the state's duties to the mortgagor

Answer 38

a description of the property and the amount of debt involved

Question 39

A creditor who obtains an interest in the property of a debtor without the debtor's express agreement may obtain: - a fine - a subrogation - a misdemeanor - a dessein - none of the other choices

Answer 39

none of the other choices

Question 40

The law concerning liens is primarily: - federal common law - federal regulatory law - federal statutory law - administrative law - none of the other choices

Answer 40

none of the other choices

Question 41

A(n) ____ is a statutory procedure under which a creditor gains the right to attach up to 25 percent of a customer's net wages to be applied to an outstanding debt. - easement - financing lien - lien - mortgage - none of the other choices are correct

Answer 41

none of the other choices are correct