Commercial Paper Essays Rule Statements

Question 1

whenever there is a conflict between the written words and the numbers

Answer 1

the written words will prevail

Question 2

where a person fails to exercise ordinary care and thereby substantially contributes to an alteration of an instrument,

Answer 2

that person is precluded from asserting the alteration against a person who, in good faith, pays the instrument and takes it for collection

Question 3

antecedent debt is

Answer 3

proper value

Question 4

a bank does not owe any duty to

Answer 4

a holder of a draft drawn on the bank to pay the draft, rather the bank’s only obligation runs to its customer, and that obligation is to pay drafts that are property payable

Question 5

if a negotiable instrument is negotiated to a HDC

Answer 5

HDC takes free of most defenses

Question 6

checks are

Answer 6

negotiable instruments

Question 7

negotiation of an order instrument requires

Answer 7

a transfer of possession plus the indorsement of the payee

Question 8

where an agent signs an instrument on behalf of a principal,

Answer 8

the principal will be bound to the same extent as if the signature were on a simple contract

Question 9

fraudulent alteration of a check

Answer 9

generally discharges all parties from liability on the check

Question 10

incoplete instrument altered by unauthorized completion

Answer 10

person who takes the instrument for value, in good faith, and without notice may enforce the instrument according to its terms as completed

Question 11

infancy is

Answer 11

real defense, raised against HDC

Question 12

as between two creditors with perfected security interests in an item of collateral, priority goes to

Answer 12

the first to file or perfect, whichever occurs first

Question 13

for a security interest to be perfected

Answer 13

it must attach to the collateral

Question 14

a security interest attaches to goods when

Answer 14

1) the parties agree to create a security interest, evidenced by an authenticated security agreement or the secured party’s possession of the goods, 2) the creditor gives value, and 3) the debtor has rights in the goods

Question 15

security interests in most goods can be perfected by

Answer 15

filing a financing statement

Question 16

HDC’s are only subject to

Answer 16

real defenses, not personal defenses

Question 17

a forgery in the chain of title

Answer 17

precludes anyone in possession from being a holder

Question 18

a holder is

Answer 18

someone in possession of an instrument with a right to enforce it

Question 19

a note payable to a specific payee may be negotiated only if

Answer 19

it is indorsed by the payee

Question 20

a person whose negligence substantially contributes to a forgery is estopped from

Answer 20

asserting the forgery against someone who took the instrument for value and in good faith

Question 21

a person who transfers an instrument for consideration warrants that

Answer 21

1) she is entitled to enforce the instrument,
2) all signatures on the instrument are authentic and authorized,
3) no defenses are good against her,
4) the instrument has not been altered
5) she has no knowledge of insolvency proceedings

Question 22

a person who signs a note other than as a maker or acceptor

Answer 22

incurs secondary liability as an indorser, becoming obligated to pay it if the maker does not pay

forged signature is signature of forger

Question 23

to be negotiable, a note must be

Answer 23

signed by its maker and be an unconditional written promise to pay a fixed amount of money, with or without interest, to order or bearer, on demand or at a definite time, without any undertaking or instruction not authorized by law

Question 24

to be properly negotiated a note payable to a pyee must be

Answer 24

indorsed by the named payee and delivered to the holder

Question 25

fraud in the execution of a note is

Answer 25

a real defense

Question 26

fraud in the inducement of a note is

Answer 26

not a real defense

Question 27

when the holder of a note transfers it for consideration, it makes a warranty that

Answer 27

no defense of any party is good against the transferor

Question 28

transfer warranty can be negated (except on checks) by

Answer 28

language clearly indicating that no warranty is being made (without recourse)

Question 29

_____ are liable for unaccepted checks dishonored by the bank

Answer 29

drawers

Question 30

shelter doctrine

Answer 30

a transferee of an HDC takes the rights of an HDC

Question 31

a bank can charge an item against a customer’s account only if the item is

Answer 31

properly payable, must be authorized by customer

Question 32

a check is properly payable only if

Answer 32

it is signed by the drawer or the drawer’s authorized agaent

Question 33

a person is precluded from raising an unauthorized signature if

Answer 33

the person failed to exercise ordinary care in preventing the forgery and that failure substantially contributed to the forgery

Question 34

in Virginia, if a claim is unliquidated or subject to dispute, it can be discharged in full if

Answer 34

the person against whom the claim is asserted in good faith tenders an instrument that conspicuously states that it is tendered in full satisfaction of the claim and the claimant obtains payment of the instrument

Question 35

Virginia does not allow avoidance where

Answer 35

the altered instrument was tendered in good faith as a full payment of the disputed debt

Question 36

a customer is precluded from asserting a forgery or alteration of his signature if

Answer 36

he does not notify the bank of either issue within the prescribed period

within 1 year after the bank made the instrument available to him

Question 37

if a statement has been available to a customer for a reasonable period and he does not object to any signatures or alterations within 30 days

Answer 37

the customer is estopped from demanding recredit on any other items forged by the same wrongdoer

Question 38

an instrument is conditional if

Answer 38

it expressly states a condition for payment or states that the promise or order is subject to or governed by another writing

Question 39

a negotiable instrument must be payable to

Answer 39

order or bearer

Question 40

an instrument is payable at a definite time if it is payable

Answer 40

on a fixed date, specified periodd of time after sight or acceptance, or at some time readily ascertainable

Question 41

promissory notes are governed by

Answer 41

Article 3 of the UCC

Question 42

a principal will be bound by the act of an agent if

Answer 42

the agent had actual or apparent authority to act on the principal’s behalf

Question 43

if a signature is unauthorized, a principal may still be liable if

Answer 43

she ratifies the signature

Question 44

ratification occurs when

Answer 44

a principal knowingly adopts a signature as her own or when, with full knowledge of the circumstances, she appropriates the benefit of the unauthorized signing or fails to deny the validity of teh signature

Question 45

a guarantor is

Answer 45

a person who promises to pay a debtor’s obligation if the debtor defaults, and whom the creditor may approach for payment only after seeking payment from the debtor

Question 46

one who guarantees a debtor’s performance on a promissory note is

Answer 46

an accomodation party, incurs liabiulity on the instruemnt in the capacity in which he signs

Question 47

if an accomodation party is forced to pay the principal debotr’s debt,

Answer 47

he is subrogated to the rights of the party paid, including any rights to collateral

Question 48

guarantor of collection becomes liable when

Answer 48

execution of a judgment against the debtor has been returned unsatisfied, the debtor is insolvent, or it otherwise appears that it is useless to proceed against the debtor

Question 49

a negotiable instrument may be transferred by its holder to

Answer 49

anyone

Question 50

a restrictive indorsement is not effective to

Answer 50

prevent further transfer or negotiation of the instrument

Question 51

in Virginia, if the contract or other instrument does not fix an interest rate, the court will

Answer 51

imply a judgment rate, and interest is payable from the date of the instrument

Question 52

a check does not discharge the obligation for which it is given, but merely

Answer 52

suspends the obligation until paid

Question 53

if a check payable to a particular person is lost or stolen and is not indorsed by the payee

Answer 53

the payee retains ownership of the check

Question 54

an oral stop payment order is valid for

Answer 54

14 days

Question 55

warranty of presentment

Answer 55

party presenting the check warrants title to the instrument and warrants that the presenter is entitled to enforce the instrument