BUL CH 22

Bob writes a check on his account at County Bank to Dona, a fa¬mous singer. The person claiming to be Dona is an imposter, however, named Edy. Edy indorses the check to Frank, for whom County Bank cashes it. Ultimately, the loss will most likely fall on a. Bob. b. County Bank. c. Dona. d. Frank.

A

Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then in¬dorses it to Nat, the present holder. Refer to Fact Pattern 22-2. Nat properly pre¬sents the note to Jake for pay-ment, but Jake dishonors it. With timely notice to the proper parties, Nat may collect payment on the note from a. Kim, Lou, or Mona. b. Kim or Lou only. c. Mona only. d. no one.

A

Jake is the maker of a $2,000 promissory note payable to Kim. Kim indorses the note to Lou who, in turn, indorses it to Mona, who then in¬dorses it to Nat, the present holder. Refer to Fact Pattern 22-2. Suppose that Mona pays Nat on the note. With timely notice to the proper parties, Mona may collect payment on the note from a. Jake, Kim, or Lou. b. Jake or Kim only. c. Lou only. d. no one.

A

Nero signs a check "pay to the order of Olive" drawn on Nero's account in Plum Bank. Olive signs the back of the check. Secondary liability on this check extends to a. Nero and Olive only. b. Nero and Plum Bank only. c. Nero only. d. Plum Bank only.

A

On May 1, Doug signs a check that is payable to the order of Extra Credit Corporation and that is dated July 1. This check is a. negotiable. b. nonnegotiable, because it is payable to Extra Credit Corporation. c. nonnegotiable, because it is postdated. d. nonnegotiable, because it is signed by Doug.

A

Opal signs a promissory note payable to the order of Payday Loan Company. The note states that it is payable "with interest at the legal rate." This note is a. negotiable. b. nonnegotiable, because it does not specify a rate of interest. c. nonnegotiable, because it is a promissory note. d. nonnegotiable, because it is payable only with interest.

A

Pola wants to transfer a check to Quin. The check is defective if it a. has been previously dishonored. b. has no irregularities on its face. c. is not overdue. d. is so complete that no element of negotiability is lacking.

A

Tyrone draws a check payable to "Cash" and presents it to United Bank for payment. This instrument is a. a bearer instrument. b. an order instrument. c. valid but nonnegotiable. d. void.

A

USA Oil Corporation signs an instrument that states it is being exe¬cuted "in accord with a contract for the purchase of 4,000 barrels of oil dated May 1." This instrument is a. negotiable. b. nonnegotiable, because information about the sale must be ob¬tained from another source. c. nonnegotiable, because it states an express condition to payment. d. nonnegotiable, because the terms of the sale are not clear.

A

Vera gives Willy a $500 check as payment for a debt. Willy crudely raises the amount of the check to $5,000 and transfers it to Xtreem Sportz store for a new bike. Xtreem deposits the check in its Yankee Bank account. Vera is liable for the payment of $5,000 to a. no one. b. Willy, Xtreem Sportz, and Yankee Bank. c. Willy only. d. Xtreem Sportz and Yankee Bank only.

A

Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment, Biff's liability on this note is a. lateral. b. primary. c. secondary. d. tertiary.

B

Don writes a check to Eve drawn on Don's account at First Bank. Eve presents the check for payment to First Bank, which ac¬cepts it. The bank is a. not liable for payment. b. primarily liable for payment. c. secondarily liable for payment. d. simultaneously liable, with Don, for payment.

B

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is a. a knowledgeable holder in due course. b. an ordinary holder. c. an ordinary holder in due course. d. an ordinary note taker.

B

Nina wants to transfer a check to Opie. The check is not defective if it a. has an obvious irregularity on its face. b. has been previously honored. c. is incomplete so that an element of negotiability is lacking. d. is overdue.

B

Ollie negotiates an order instrument to Phil by a. assignment of its rights under a contract. b. delivery with any necessary indorsement. c. making an unconditional promise to pay. d. presenting it in response to a demand by B.

B

On the back of a check payable to Nero, he writes "Pay to Odell, without recourse" and signs it. This a. does not effect the check's negotiability or any party's liability. b. relieves Nero of liability on the check. c. relieves Odell of liability on the check. d. renders the check nonnegotiable.

B

Opal asks Paolo, who does not understand English, to sign what Opal says is an application to open a bank account. In fact, the "application" is a note. If sued on the note by an HDC, Paolo's best defense would be a. extreme duress. b. fraud in the execution. c. fraud in the inducement. d. mistake.

B

Petra signs a check payable to Quincy, who in¬dorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is a. an assignment. b. a negotiation. c. a payment. d. a sale.

B

Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games. This instrument is a. a bearer instrument. b. an order instrument. c. valid but nonnegotiable. d. void.

B

Ray signs a promissory note for $10,000 in favor of State University (SU). The note does not specify the date of its payment. Ray defaults. In SU's suit to collect on the note, the court will most likely rule in favor of a. Ray, because SU assumed the risk that the note would not be paid. b. Ray, because the note is not payable at a definite time or on demand. c. SU, because the note is an unconditional promise to pay the holder. d. SU, because there is a uniform "default time" for repayment when a date is not specified.

B

Rodeo Ranch's agent Slim is authorized to draw checks on Rodeo Ranch's account in Town Bank. Upper Range Corporation is a Rodeo Ranch supplier. Slim writes a check "pay to the order of Upper Range [signed] Slim," indorses the check in Upper Range's name, and deposits it in his account in Verity Bank. If Verity Bank collects payment, the ultimate party most likely to suffer the loss is a. no one. b. Rodeo Ranch. c. Town Bank. d. Upper Range.

B

Vladimir negotiates a bearer instrument to Wendy by a. assignment. b. delivery. c. presenting it in response to a demand by Wendy. d. promising to pay.

B

Wilbur signs a note that includes a clause under which the note's holder can delay the date of its payment indefinitely. This is a. an acceleration clause. b. an extension clause. c. an immaturity clause. d. a stop-payment clause.

B

EZ Credit Company signs an instrument payable to the order of Flem that states, "The maker of this note at the date of maturity, May 1, 2013, can extend the time of pay¬ment, but for no more than a rea¬sonable time." This instrument is a. negotiable. b. nonnegotiable, because it includes an extension clause. c. nonnegotiable, because it is not payable within a definite time. d. nonnegotiable, because it is payable to a specific payee.

C

GR8 Products, Inc., warrants its goods to be free of defects. If Heck is¬sues an instrument to obtain goods from GR8 that prove defective, Heck can avoid paying on the instrument a. only if it is a check. b. only if it is a note. c. whether it is a check or a note. d. under no circumstances.

C

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Kilroy is a. an extraordinary holder in due course. b. an ordinary check passer. c. an ordinary holder. d. an ordinary holder in due course.

C

To finance the purchase of a house from Tuna, Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10, 2040. To be negotiable, this instrument must include the signature of a. a non-party witness. b. Tuna or Tuna's realtor. c. Uri. d. Verity's chief financial officer.

C

To pay for a new desk bought at Office Outlet, Pete makes a check pay¬able to "Offs Outlet." A proper indorsement of the check is a. "Office Outlet" only. b. "Offs Outlet" only. c. "Office Outlet" or "Offs Outlet." d. "Pete" only.

C

Todd indorses a check, "Pay to Interstate Trucking if they deliver the lumber by May 1, 2010." This is a. a blank indorsement. b. a qualified indorsement. c. a restrictive indorsement. d. a special indorsement.

C

Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012. 1. Refer to Fact Pattern 22-1. The instrument that Ewa signed is most likely a. a certificate of deposit. b. a draft. c. an order to pay. d. a promissory note.

D

Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012. Refer to Fact Pattern 22-1. With respect to this instrument, First States Bank is a. the drawee. b. the drawer. c. the maker. d. the payee.

D

Owen is a holder of a promissory note obtained from Purchase Money, Inc. Regarding the defenses against payment of the note to which Purchase Money is subject, Owen, as an ordinary holder, is subject to a. more defenses. b. no defenses. c. some defenses, but not as many. d. the same defenses

D

State Bank receives a check drawn by Tricia. The check is re¬ceived af¬ter the established "cutoff" hour. Payment can be postponed without dishonor a. indefinitely. b. under no circumstances. c. unless Tricia personally demands acceptance. d. until the close of the next business day.

D

Superior Company draws a check payable to Ted. Uri makes a note payable to Vital Finance Corporation. Primarily liable parties include a. neither Superior nor Uri. b. Superior and Uri. c. Superior only. d. Uri only.

D

To finance the purchase of a car from Giant Auto Sales, Hoppy signs an instrument promising to pay to "Ideal Credit Union" $18,000 with interest in installments with the final payment due May 15, 2014. To be negotiable, this instrument must include on its face a. any conditions on the sale of the car. b. any conditions to the disbursement of the funds. c. any conditions to the repayment of the loan. d. no conditions.

D