Business Law, 8e: Chapter 22

Chapter 22
Negotiation and Holders in Due Course/Holders by Due Negotiation :

Your Full Name:

Your Email Address:

The Email address of an instructor to mail your quiz results:

1. A holder through a holder in due course is subject to all defenses.: a. True
b. False

2. A universal defense will defeat a holder in due course and a holder through holder in due course.: a. True
b. False

3. Illegality is a universal defense whether or not the illegality voids an instrument.: a. True
b. False

4. The fact that an instrument has been altered is a complete defense against holder in due course.: a. True
b. False

5. Andy needed a new set of contacts. Andy issued a check to Dr. Falk and Dr. Falk promised to order the contacts the next day. Dr. Falk is not an HDC of the check because he has not given value.: a. True
b. False

6. In order to qualify as a negotiation, the transfer of a negotiable instrument must leave the transferee in the position of a holder in due course.: a. True
b. False

7. A special indorsement is one that designates the next holder of the instrument.: a. True
b. False

8. A "restrictive indorsement" prevents any further negotiation of an instrument so indorsed.: a. True
b. False

9. "Infancy" is a real defense on a negotiable instrument, but only if state law so provides.: a. True
b. False

10. A person asserting the rights of a holder in due course has the burden of proving that he or she has attained that status.: a. True
b. False

11. Ollie issued a negotiable check, payable to the order of Bud. Bud indorsed the check and gave it to Colin. The indorsement reads, "Pay to the order of Colin, Bud." Which of the following statements most accurately describes the check?: a. The check is bearer paper and negotiated by transfer of possession.
b. The check is order paper and negotiated by the indorsement of Colin and transfer of possession.
c. The check is nonnegotiable and cannot be negotiated.
d. The check is restrictive and cannot be negotiated.

12. Jim issued a negotiable check, payable to the order of Bud. Bud indorsed the check and gave it to Colin. The indorsement reads, "Bud." Which of the following statements most accurately describes the check?: a. The check is bearer paper and negotiated by transfer of possession.
b. The check is order paper and negotiated by the indorsement of Colin and transfer of possession.
c. The check is nonnegotiable and cannot be negotiated.
d. The check is restrictive and cannot be negotiated.

13. Judith Morgan indorsed and delivered an negotiable instrument issued to her to Juan. The indorsement was as follows: "Pay to Juan Diaz if he buys my 1990 Camaro, Judith Morgan." Can Juan negotiate the instrument to Cindy?: a. No, the instrument is no longer negotiable because of the condition.
b. Yes, once the condition is met.
c. Yes, and if Cindy takes the instrument for value she may disregard the condition.
d. Yes, but then he would be liable for conversion.

14. Traditionally, in order to show a lack of good faith, it had to be shown:: a. the party knew the instrument was dishonored.
b. the party knew of the defect or ignored such facts.
c. the party participated in the fraud.
d. None of the above.

15. Mehroo issued a negotiable check, payable to the order of Layna. Layna indorsed the check and gave it to Richard. The indorsement reads, "Pay to the order of Richard, Without Recourse, Layna." Which of the following statements is correct?: a. Layna has no liability as an indorser to Richard if Mehroo dishonors the check.
b. Layna has no liability as an indorser to Richard but if Mehroo dishonors the check, she can be held liable for conversion.
c. Layna has no liability as an indorser to Richard but is secondarily liable to the others in the chain of liability.
d. Layna will be liable as an indorser to Richard but no one else in the chain of liability.