Question 1

Igor signed a note to Gogh Bank, and his friend Sergei also signed the note as an accommodation maker. If Igor defaults on the note when it is due, what are Sergei's rights and obligations?

Accepted Answer

A)   Sergei has the right to recover his payment from the bank.
B)   Sergei has the same contractual liability as Igor and must pay the bank.
C)   Sergei cannot recover his money from Igor or the bank since he has primary liability.
D)   Sergei has secondary liability.E) A) and B)
F) A) and C)

Question 2

Which of the following statements is true of the obligation of the maker?

Accepted Answer

A)   It is owed to a person who is not entitled to enforce the instrument.
B)   It is given to a nonholder in possession of the instrument, who does not have the rights of a holder.
C)   It is owed to any indorser who paid the instrument pursuant to her indorser's liability.
D)   It is to pay the negotiable instrument even if it has not been signed by the maker.E) A) and B)
F) A) and C)

Question 3

Anupama drew a check on her account at Mortimer Bank payable to the order of Prahlad. When Prahlad presented the check for payment, Mortimer Bank refused to honor the check. Under these circumstances, the bank _____.

Accepted Answer

A)   may be liable to Anupama for wrongfully refusing payment if Anupama has sufficient funds in her checking account to cover it
B)   may be liable to Prahlad for wrongfully refusing payment if Anupama has sufficient funds in her checking account to cover it
C)   has breached its transferor's warranties
D)   will be liable to both Prahlad and AnupamaE) A) and C)
F) None of the above A

Question 4

If a person purporting to act as a representative signs an instrument by signing either the name of the represented person or the name of the signer, that signature binds the represented person to the same extent she would be bound if the signature were on a simple contract.

Accepted Answer

A) True 
 B)False

Question 5

Mack is Bertha's agent and is authorized to sign checks for her. Mack signs one of Bertha's checks with his own name only. Which of the following parties is liable on the check?

Accepted Answer

A)   Bertha
B)   Mack
C)   Mack's bank
D)   Bertha's bankE) A) and B)
F) B) and D)

Question 6

James draws a check on his account at Harper Bank payable to the order of Terry. James does not ask Harper Bank to accept or certify the check. If Harper Bank does not pay the check when Terry presents it for payment, then:

Accepted Answer

A)   Harper Bank is liable to James because it was not asked to accept or certify the check.
B)   James is liable to Terry on the basis of his drawer's obligation.
C)   James transfers his duties as a drawer to the drawee bank, and the bank is liable.
D)   Terry is liable to James because the bank does not pay the check when Terry presents it for payment.E) A) and B)
F) A) and C) B

Question 7

Under Revised Article 3 of the Uniform Commercial Code rules for beneficiaries, in the event of a breach of transfer warranty, _____.

Accepted Answer

A)   the damages recoverable will be less than the amount of the instrument
B)   the damages recoverable may not be more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach
C)   a beneficiary of the transfer warranties who took the instrument in good faith may not recover from the warrantor an amount equal to the loss suffered as a result of the breach
D)   no damages may be recoveredE) None of the above
F) A) and B)

Question 8

Maya stole a check from Orhan payable to the order of Orhan. Maya forged Orhan's signature and presented the check for payment at Winston Bank, which honored the check. If Orhan sues Winston Bank for the amount of the check, under what theory, can Orhan recover the funds from the bank?

Accepted Answer

A)   Conversion
B)   Fraud
C)   Unfair and deceptive practices
D)   Fictitious payee ruleE) All of the above
F) B) and C)

Question 9

Under Revised Article 3 of the Uniform Commercial Code (UCC), presentment must be made by written communication.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true of contractual liability on negotiable instruments?

Accepted Answer

A)   It can arise even when a person has not signed the negotiable instrument.
B)   It cannot arise when a person has authorized someone else to sign the negotiable instrument.
C)   It can arise from negligence relating to the issuance.
D)   It cannot arise from improper payment.E) None of the above
F) A) and B)

Question 11

A person who transfers a negotiable instrument to someone else and for consideration does not warrant that all signatures on the instrument are authentic or authorized.

Accepted Answer

A) True 
 B)False

Question 12

A nonindorsing transferor makes:

Accepted Answer

A)   all six transfer warranties only to the immediate transferor.
B)   all five transfer warranties to all subsequent holders.
C)   only four transfer warranties to the immediate transferor.
D)   all five transfer warranties, with a change in the fourth warranty, to all subsequent holders.E) B) and C)
F) B) and D) A

Question 13

Gabrielle borrows $1,000 from Frank to pay for school and gives Frank a note for that amount. Frank wants Gabrielle's father to sign as an accommodation party. Gabrielle's father signs below Gabrielle's signature on the fall of the note. Which of the following statements is true of this case?

Accepted Answer

A)   Only Gabrielle has primary liability as a maker.
B)   Only Gabrielle's father has primary liability as an accommodation maker.
C)   Gabrielle and her father have the same contractual liability.
D)   Gabrielle has primary liability, and her father has secondary liability.E) A) and D)
F) B) and D)

Question 14

If an authorized representative signs his name as the representative of a drawer of a check without noting his representative status, but the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check as long as his signature was authorized.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true of primary liability on a check when it is issued?

Accepted Answer

A)   The payee is primarily liable on it.
B)   The drawer is primarily liable on it.
C)   The drawee bank is primarily liable on it.
D)   No party is primarily liable on it.E) B) and D)
F) None of the above

Question 16

The terms of the contract of the parties to a negotiable instrument are set out in:

Accepted Answer

A)   the text of the instrument.
B)   Article 3 of the Uniform Commercial Code.
C)   the cashier's check.
D)   Article 5 of the Uniform Commercial Code.E) A) and D)
F) A) and C)

Question 17

People who present drafts for warranties:

Accepted Answer

A)   do not make a warranty that they have knowledge of the insolvency proceedings commenced regarding the drawer.
B)   make a warranty that the instrument has not been altered.
C)   make warranties that are similar to those transferors make.
D)   make a warranty that they are aware of the unauthorized signature of the maker.E) B) and C)
F) A) and B)

Question 18

The maker of a promissory note is primarily liable for payment of it.

Accepted Answer

A) True 
 B)False

Question 19

If a drawee bank mistakenly paid a check over a stop-payment order, the bank cannot recover if it paid the check to a presenter who had taken the instrument in good faith and for value.

Accepted Answer

A) True 
 B)False

Question 20

The impostor rule regarding negotiable instruments:

Accepted Answer

A)   is devised not to put the responsibility for determining the true identity of the payee on the drawee of a check.
B)   makes the payee's signature valid even though it is a forgery.
C)   does not force the maker to find the wrongdoer.
D)   lays the responsibility of determining the identity of payee on later holders of an instrument.E) B) and C)
F) All of the above

Exam 40: Liability of Parties

Igor signed a note to Gogh Bank, and his friend Sergei also signed the note as an accommodation maker. If Igor defaults on the note when it is due, what are Sergei's rights and obligations?

Correct Answer
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Which of the following statements is true of the obligation of the maker?

Correct Answer
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Anupama drew a check on her account at Mortimer Bank payable to the order of Prahlad. When Prahlad presented the check for payment, Mortimer Bank refused to honor the check. Under these circumstances, the bank _____.

Correct Answer
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A

If a person purporting to act as a representative signs an instrument by signing either the name of the represented person or the name of the signer, that signature binds the represented person to the same extent she would be bound if the signature were on a simple contract.

Correct Answer
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Mack is Bertha's agent and is authorized to sign checks for her. Mack signs one of Bertha's checks with his own name only. Which of the following parties is liable on the check?

Correct Answer
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James draws a check on his account at Harper Bank payable to the order of Terry. James does not ask Harper Bank to accept or certify the check. If Harper Bank does not pay the check when Terry presents it for payment, then:

Correct Answer
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B

Under Revised Article 3 of the Uniform Commercial Code rules for beneficiaries, in the event of a breach of transfer warranty, _____.

Correct Answer
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Maya stole a check from Orhan payable to the order of Orhan. Maya forged Orhan's signature and presented the check for payment at Winston Bank, which honored the check. If Orhan sues Winston Bank for the amount of the check, under what theory, can Orhan recover the funds from the bank?

Correct Answer
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Under Revised Article 3 of the Uniform Commercial Code (UCC), presentment must be made by written communication.

Correct Answer
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Which of the following statements is true of contractual liability on negotiable instruments?

Correct Answer
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A person who transfers a negotiable instrument to someone else and for consideration does not warrant that all signatures on the instrument are authentic or authorized.

Correct Answer
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A nonindorsing transferor makes:

Correct Answer
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A

Gabrielle borrows $1,000 from Frank to pay for school and gives Frank a note for that amount. Frank wants Gabrielle's father to sign as an accommodation party. Gabrielle's father signs below Gabrielle's signature on the fall of the note. Which of the following statements is true of this case?

Correct Answer
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Correct Answer
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Which of the following statements is true of primary liability on a check when it is issued?

Correct Answer
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The terms of the contract of the parties to a negotiable instrument are set out in:

Correct Answer
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People who present drafts for warranties:

Correct Answer
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The maker of a promissory note is primarily liable for payment of it.

Correct Answer
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If a drawee bank mistakenly paid a check over a stop-payment order, the bank cannot recover if it paid the check to a presenter who had taken the instrument in good faith and for value.

Correct Answer
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The impostor rule regarding negotiable instruments:

Correct Answer
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Exam 40: Liability of Parties

Igor signed a note to Gogh Bank, and his friend Sergei also signed the note as an accommodation maker. If Igor defaults on the note when it is due, what are Sergei's rights and obligations?

Correct AnswerverifiedShow Answer

Which of the following statements is true of the obligation of the maker?

Correct AnswerverifiedShow Answer

Anupama drew a check on her account at Mortimer Bank payable to the order of Prahlad. When Prahlad presented the check for payment, Mortimer Bank refused to honor the check. Under these circumstances, the bank _____.

Correct AnswerverifiedA

If a person purporting to act as a representative signs an instrument by signing either the name of the represented person or the name of the signer, that signature binds the represented person to the same extent she would be bound if the signature were on a simple contract.

Correct AnswerverifiedShow Answer

Mack is Bertha's agent and is authorized to sign checks for her. Mack signs one of Bertha's checks with his own name only. Which of the following parties is liable on the check?

Correct AnswerverifiedShow Answer

James draws a check on his account at Harper Bank payable to the order of Terry. James does not ask Harper Bank to accept or certify the check. If Harper Bank does not pay the check when Terry presents it for payment, then:

Correct AnswerverifiedB

Under Revised Article 3 of the Uniform Commercial Code rules for beneficiaries, in the event of a breach of transfer warranty, _____.

Correct AnswerverifiedShow Answer

Maya stole a check from Orhan payable to the order of Orhan. Maya forged Orhan's signature and presented the check for payment at Winston Bank, which honored the check. If Orhan sues Winston Bank for the amount of the check, under what theory, can Orhan recover the funds from the bank?

Correct AnswerverifiedShow Answer

Under Revised Article 3 of the Uniform Commercial Code (UCC), presentment must be made by written communication.

Correct AnswerverifiedShow Answer

Which of the following statements is true of contractual liability on negotiable instruments?

Correct AnswerverifiedShow Answer

A person who transfers a negotiable instrument to someone else and for consideration does not warrant that all signatures on the instrument are authentic or authorized.

Correct AnswerverifiedShow Answer

A nonindorsing transferor makes:

Correct AnswerverifiedA

Gabrielle borrows $1,000 from Frank to pay for school and gives Frank a note for that amount. Frank wants Gabrielle's father to sign as an accommodation party. Gabrielle's father signs below Gabrielle's signature on the fall of the note. Which of the following statements is true of this case?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true of primary liability on a check when it is issued?

Correct AnswerverifiedShow Answer

The terms of the contract of the parties to a negotiable instrument are set out in:

Correct AnswerverifiedShow Answer

People who present drafts for warranties:

Correct AnswerverifiedShow Answer

The maker of a promissory note is primarily liable for payment of it.

Correct AnswerverifiedShow Answer

If a drawee bank mistakenly paid a check over a stop-payment order, the bank cannot recover if it paid the check to a presenter who had taken the instrument in good faith and for value.

Correct AnswerverifiedShow Answer

The impostor rule regarding negotiable instruments:

Correct AnswerverifiedShow Answer

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A

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B

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A

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