CPAP Flashcards
Hoover is holder in due course of check which was originally payable to the order of Nelson or bearer and has the following endorsements on its back:
Nelson (signature)
Pay to the order of Maxwell
Duffy (signature)
Without Recourse
Maxwell (signature)
Howard (signature)
Which of the following statements about the check is correct?
a. It was order paper in Howard’s hands
b. It was originally order paper.
c. Duffy’s signature was not necessary for the check to be negotiated.
d. Maxwell’s signature was not necessary for it to be negotiated.
Duffy’s signature was not necessary for the check to be negotiated.
Johnson lost a check that he had received for professional services rendered. The instrument on its face was payable to Johnson’s order. He had endorsed it on the back by signing his name and printing “for deposit only” above his name. Assuming the check is found by Alcatraz, a dishonest person who attempts to cash it, which of the following is correct?
a. If Alcatraz simply signs his name beneath Johnson’s endorsement, he can convert it into bearer paper and holder in due course would take free of the restriction.
b. The endorsement prevents further transfer or negotiation by anyone.
c. Any transferee of the instrument must pay or apply any value given by him for the instrument consistent with the endorsement.
d. The endorsement is a blank endorsement and holder in due course who cashed it for Alcatraz would prevail.
Any transferee of the instrument must pay or apply any value given by him for the instrument consistent with the endorsement.
In order to negotiate bearer paper, one must
Deliver the paper.
On August I, Titan wrote a personal check that was drawn on First Plymouth Bank and made payable to Brass. Brass, on August 2, presented the check to First Plymouth Bank for payment, which was refused. Who had primary liability on this check?
No one on August I or August 2.
Which of the following will not constitute value in determining whether person is holder in due course?
a. The performance of services rendered the payee of a negotiable instrument who endorses it in payment for services.
b. The taking of a negotiable instrument for a future consideration.
c. The giving of one’s own negotiable instrument in connection with the purchase of another negotiable instrument.
d. The taking of a negotiable instrument as security for loan.
The taking of a negotiable instrument for a future consideration.
Archer has in his possession a bearer negotiable instrument. He took it by negotiation from Perth who had stolen it from Cox’s office along with cash and other property. The robbery of Cox’s office had received appropriate coverage in the local papers in the area in which both Archer and Cox reside. Archer did not know that Perth had stolen the instrument when he purchased it at a 20% discount. Cox refuses to pay and Archer has commenced legal action asserting that he is a holder in due course. Which of the following statements is correct?
a. The discount in and of itself prevents Archer from qualifying as holder in due course or at least prevents him from so qualifying as to the 20%.
b. Archer is a holder in due course and will prevail.
c. Archer is prevented from qualifying as a holder in due course because there had been general notice published in the community about the robbery.
d. Even if all other requisites are satisfied, Archer’s title is defective in that there was no delivery by Cox of the instrument.
Archer is a holder in due course and will prevail.
Smith buys a TV set from the ABC Appliance Store and pays for the set with a check. Later in the day Smith finds a better model for the same price at another store. Smith immediately calls ABC toying to cancel the sale. ABC tells Smith that they are holding him to the sale and have negotiated the check to their Wholesaler, Glenn Company, as a partial payment on inventory purchases. Smith telephones his bank, the Union Trust Sank, and orders the bank to stop payment on the check. Which of the following statements is correct?
a. Glenn cannot hold Smith liable on the check.
b. Union Trust is not bound or liable for Smith’s stop payment order unless the order is placed in writing.
c. If Glenn can prove it is a holder in due course, the drawee bank, Union Trust, must honor Smith’s check.
d. If Union Trust mistakenly pays Smith’s check 2 days after receiving the stop order, the bank will not be liable.
If Union Trust mistakenly pays Smith’s check 2 days after receiving the stop order, the bank will not be liable.
On April 2, Harris agreed to sell a computer to Cross for $390. At the time of delivery, Cross gave Harris $90 and a written instrument, signed by Cross, in which Cross promised to pay Harris the balance on April 20. The instrument also made a reference to the sale of the computer. Under the UCC Negotiable Instruments Article, the instrument is a
Promissory note.
Train issued a note payable on June 1 to Blake in payment of contracted services that Blake was to perform. Blake endorsed the note “pay to bearer” and delivered it to Reed in satisfaction of a debt owed Reed. On June 3, Reed presented the note for payment to Train. Train refused to pay Reed on the note because S\Blake had not yet performed the services. Under the Negotiable Instruments Article of the UCC, must Train pay Reed?
Yes, Train has to pay Reed because Reed was a holder in due course.
Kirk made a check payable to Haskin’s order for a debt she owed on open account. Haskin negotiated the check by blank endorsement to Carlson who deposited it in his checking account. The bank returned the check with the notation that payment was refused due to insufficient funds. Kirk is insolvent. Under the circumstances
If there is paper presentment, and notice is properly given by Carlson to Haskin, Carlson may recover the amount of the check from Haskin.
Under the Negotiable Instruments Article of the UCC, a holder in due course in a nonconsumer transaction takes a negotiable instrument free from which of the following defenses that may be asserted by a party with whom the holder in due course had not dealt?
Breach of contract.
To be holder in due course, the holder must fulfill certain requirements. Which of the following does not fulfill the value requirement?
a. The holder promises in writing to perform specified services within 6 months.
b. The holder exchanges the negotiable instrument for another negotiable instrument.
c. The holder takes possession of the negotiable instrument as collateral of another debt.
d. The holder gives $930 for a promissory note with a face amount of $1,000.
The holder promises in writing to perform specified services within 6 months.
In connection with check and promissory note, which of the following is correct?
a. A promissory note may only be made payable to the order of a named payee.
b. A check may be made payable upon the happening of an event uncertain as to the time of occurrence without affecting its negotiability.
c. A promissory note may only be payable at a stated time in order to meet the requirements for negotiability.
d. A check may be made payable to the order of the drawer or to bearer.
A check may be made payable to the order of the drawer or to bearer.
Jane Lane, a sole proprietor, has in her possession several checks which she received from her customers. Lane is concerned about the safety of the checks since she believes that many of them are bearer paper which may be cashed without endorsement. The checks in Lane’s possession will be considered order paper rather than bearer paper if they were made payable (in the drawer’s handwriting) to the order of
Bearer, and endorsed by Ken Kent making them payable to Jane Lane.
The following note was executed by Elizabeth Quinton on April 17, year I, and delivered to Ian Wolf:
(Face)
April 17, year 1
On demand, the undersigned promises to pay to the order of Ian Wolf
Seven Thousand and 00/100
Dollars Elizabeth Ouinton
Elizabeth Quinton
(Back)
Ian Wolf
Ian Wolf
George Vernon
Samuel Thorn
Samuel Thorn
Alan Yule
George Vernon
Alan Yule
In sequence, beginning with Wolf’s receipt of the note, this note is properly characterized as what type of commercial paper?
Order, bearer, order, order, bearer.
Watson made out a negotiable promissory note to the order of Kerrigan as payment for a computer that Kerrigan promised to deliver that afternoon. Kerrigan immediately endorsed the note over to his daughter as a gift. Kerrigan’s daughter was unaware that her father failed to deliver the computer until she tried to get payment on the note from Watson. Which of the following is correct?
a. Watson need not pay on the note because he has a personal defense.
b. Kerrigan’s daughter qualifies as a holder in due course because she was unaware of the nondelivery.
c. Watson need not pay on the note because the holder is a close relative of the person who failed to deliver.
d. Watson need not pay on the note because he has a real defense.
Watson need not pay on the note because he has a personal defense.
Which of the following on the face of an otherwise negotiable instrument will affect the instrument’s negotiability?
a. The instrument is postdated.
b. The instrument contains a promise to provide additional collateral if there is decrease in value of the existing collateral.
c. The instrument is payable at a definite time subject to an acceleration clause in the event of a default.
d. The instrument is payable 6 months after the death of the maker.
The instrument is payable 6 months after the death of the maker.
Union Co. possesses the following Instrument:
Holt, MT $4,000 April I5, year 1
Fifty days after date, or sooner, the undersigned promises to pay to the order of
Union Co
Four Thousand dollars
Salem Sank Holt MT
At Ten percent interest per annum.
This instrument is secured by the maker’s business inventory. EASY, INC
By Thomas Foy
Thomas Foy, President
Assuming all other requirement of negotiability are satisfied, this instrument is
Negotiable because it is payable in a fixed amount in money.
Mask stole one of Bloom’s checks. The check was already signed by Bloom and made payable to Duval. The check was drawn on united Trust Company. Mask forged Duval’s signature on the back of the check and cashed the check at the Corner Check Cashing Company which in turn deposited it with its bank, Town National Bank. Town National proceeded to collect on the check from United. None of the parties mentioned was negligent. Who will bear the loss assuming the amount cannot be recovered from Mask?
Corner Check Cashing Company.
Dunbar is the holder and payee of check. He takes it to the Federal Bank upon which it was drawn and has it certified. Which of the following is correct?
a. Prior to certification of the check, Federal is only secondarily liable on the check.
b. If Federal refuses to certify the check, the check will be dishonored.
c. Federal is obligated to certify the check as long as there are adequate funds in the account.
d. After certification of the check, Federal is primarily liable and the drawer is discharged on the check.
After certification of the check, Federal is primarily liable and the drawer is discharged on the check.
A trade acceptance usually
Provides that the drawer is also the payee.
Karr transferred a negotiable instrument payable to his order to Watson for value. Karr did not endorse the instrument. As result of the transfer, Watson
Is entitled to an unqualified endorsement by Karr.
Harper made out a draft which indicated Brush was the payee. It was drawn on Murdock Sank. The draft was payable 14 days after arush delivers all the computers listed in a contract between Harper and Brush. Does this payment term on the draft destroy negotiability?
Yes, because the draft is not payable at a definite time.
Clarkson received a check from Shipley which was incomplete as to the amount. The check was given as payment in advance on the purchase of 100 CB radios. The amount was left blank because Clarkson had the right to substitute other CB models if available for those ordered, which would change the price. It was agreed that in no event would the purchase price exceed $1,800. Desperate for cash, Clarkson wrongfully substituted much more expensive CB radios thereby increasing the purchase price to $2,200. Clarkson then negotiated the check to Marshall, one of his suppliers. Clarkson filled in the $2,200 in Marshall’s presence showing him the shipping order and invoice applicable to the sale to Shipley. Marshall accepted the check in payment of $1,400 overdue debts and $300 in cash. Under the circumstances, Marshall is
A holder in due course and entitled to recover the full amount.
Which of the following defenses may be successfully asserted by the maker against holder in due course?
a. Discharge of the maker of the instrument in bankruptcy proceedings.
b. Total failure to perform the contractual undertaking for which the instrument was given.
c. Fraudulent misrepresentations as to the consideration given by a prior holder in exchange for the negotiable instrument.
d. Wrongful filling in of an incomplete instrument by prior holder.
Discharge of the maker of the instrument in bankruptcy proceedings.
A holder in due course of negotiable promissory note will take the note subject to which of the following defenses?
a. Unauthorized signature.
b. Failure of consideration.
c. Breach of contract.
d. Fraud in the inducement.
Unauthorized signature.
Your client has in its possession the following instrument:
$700.00 Pavo, Utah June I, year I
Thirty days after date I promise to pay to the order of
Cash
Seven hundred Dollars
Boise, Idaho
Value received with interest at the rate of ten percent per annum. This instrument is secured by a conditional sales contract
No. 20 Due July I, year I Signature
A negotiable bearer note.
