REG mod 28

Question 1

Describe the Shelter Rule.

Answer 1

A holder of an instrument may obtain all of the rights of a holder in due course if they obtained the instrument from a holder in due course.

Question 2

Name some personal defenses.

Answer 2

“Personal defense will lose against the holder in due course. Personal defenses include:
Lack of consideration
Breach of contract
Fraud in the inducement”

Question 3

If an instrument has a variable interest rate, does the instrument meet the fixed amount of money criteria required to be negotiable?

Answer 3

Yes, because the amount of money can be calculated.

Question 4

Name an example of a promissory note.

Answer 4

Certificate of Deposit

Question 5

What is a check?

Answer 5

A draft instrument that is payable on demand

Question 6

What are the requirements for an instrument to be negotiable?

Answer 6

Signed by the maker (be in writing)
Unconditional promise (no conditions)
Money - Fixed amount
Bearer - pay to bearer
Order -pay to the order of (exception: check)
Demand- payable on demand or a specific time

Question 7

A restrictive endorsement destroys the negotiability of an instrument. True / False

Answer 7

FALSE

Question 8

Name the two types of commercial paper.

Answer 8

Bearer paper, Order paper

Question 9

Who is secondarily liable on commercial paper?

Answer 9

Anyone who endorses the instrument, unless the endorsement was qualified.

Question 10

Name two types of drafts.

Answer 10

Check & a trade acceptance