Bus Law Ch 13

112. When a draft guarantees payment for goods in international trade, the draft is called a:

. bill of exchange

5. Before passage of laws affecting negotiable instruments:

a. the right to payment was a contract right that could not be sold

95. The of a note is the party who promises to pay another party.

b. maker

149. Capacity refers to:

b. the debtor's ability to pay

3. The law of negotiable instruments has it origins in:

c. England

146. Debt incurred by business includes:

c. both long and short-term debt

163. In a(n)________, goods and services are sold on an invoice that shows transactions; full payment is expected within a fixed time period.

d. open account

116. A sight draft is:

d. payable upon presentation by the seller to the buyer of the goods

153. Character refers to:

d. the debtor's reputation

60. The one who agreed to make a payment, such as a bank making a payment based on a document presented to it is:

d. the drawee

124. are drafts that mature on the payment date set in the future.

a. Time or term draft

79. A check must be paid:

a. on demand

44. If a negotiable instrument is assigned, the assignee has:

a. the same contract rights and responsibilities as the assignor

42. Which of the following requirements is necessary to be a holder in due course:

a. the transferee must give value for the negotiable instrument

122. specify payment to be made in the future, such as 60 days from the date of the writing of the draft.

c. Time or term drafts

48. If an instrument is determined to be nonnegotiable, and a dispute arises, Article 3 will:

c. not apply and the parties will need to resolve their dispute with reference to the common law of contracts

130. Most large certificates of deposit are:

e. negotiable

97. Promissory notes are instruments that involve parties.

two

135. A________is one who lends money to, or allows goods or services to be purchased on credit by, another party, the debtor.

. creditor

107. Under Article 3 of the UCC, a draft is:

a. an unconditional written order to pay that involves three parties: drawer, drawee, payee; the drawee may be a bank, person, or business; payment may be set at a future time

17. If a negotiable instrument is , the assignee has the same contract rights and responsibilities as the assign-or

a. assigned

71. With negotiable instruments, the party to receive payment is the:

a. beneficiary

6. Negotiable instruments:

a. substitute for cash

10. Negotiable instruments are a part of the commercial law through:

b. Article 3 of the UCC

73. Under Article 3 of the UCC, a check is:

b. a draft drawn on a bank and payable on demand

87. Julia is buying a house from Mary. Mary wants to ensure that the bank will honor the check Julia uses to buy the house so she will probably insist that Julia pay with a:

b. cashier's check

137. A creditor is one who lends money to, or allows goods or services to be purchased on credit by, another party, the:

b. debtor

160. The most common form of credit is a(n):

b. open account

90. Under Article 3 of the UCC, a note is:

c. a promise by one party to pay a certain sum of money to another party; two parties are involved: the maker and the payee; payment may be set at a date in the future

141. To raise needed capital, small companies most often rely on:

c. debt financing

126. When a payee wants to get cash immediately for a draft he can sell it to another party, but interest must be paid. This is called:

c. discounting the draft

109. A(n) is a legally binding written order to pay a fixed sum of money that involves three parties.

c. draft

56. To be found a holder in due course, a transferee must:

c. have given value for the negotiable instrument, taken it without knowledge of any defects and in good faith

101. When real estate is used as collateral to secure the loan, the note is a:

c. installment note

80. A check must have______as its drawee.

d. a bank

50. Besides being written, an unconditional order or promise to pay, must be made out for a definite sum of money. To be negotiable under Article 3 of the UCC, an instrument also must meet which of the following requirements it:

e. must be payable on demand or at a specified time period and must be signed by the maker or the drawer and must be made out "to order" or "to bearer"

132. Most large certificates of deposit are:

e. negotiable e. insured by the FDIC for up to $100,000

155. Collateral refers to:

e. the debtor's assets to secure debt

134. A creditor is a person or business who:

is one who lends money to, or allows goods or services to be purchased on credit by, another party, the a. creditor

94. A promise to pay a certain sum of money to another party is a type of commercial paper called a(n):

a. note

105. When a note is to be paid in regular payments but also includes a final payment more than double the regular payments, the note is called:

c. a payee note

59. Negotiable instruments under the UCC do not include:

c. cash

28. Nonnegotiable instruments are governed by

. the common law of contracts

128. An "acknowledgment by a bank" that it has received money from a customer with a promise by the bank that it will repay the money received at a date specified or, in some instances, on demand is a:

a. certificate of deposit

75. A "draft drawn on a bank and payable on demand" is a:

a. check

77. The most commonly used form of draft is a:

a. check

144. Which of the following are sources of credit information:

a. customer financial statements b. banks c. credit reporting agencies d. trade associations e. all of the other specific choices are sources of credit information

68. The______agrees to make the payment, such as the bank making a payment based on a document presented to it.

a. drawee

37. To transfer an instrument made "to the order" of the payee, the payee must:

a. endorse and deliver the instrument to a third party

36. To transfer an instrument made "to the order" of the payee, the payee must:

a. endorse the instrument b. deliver the instrument to a third party d. both a and b are necessary

142. The sale of stock in the company or the sale of negotiable instruments that are subject to securities regulation is known as:

a. equity financing

114. The most common use of drafts is to:

a. guarantee payment for goods in international trade

35. Which of the following is one of the UCC's requirements for an instrument to be negotiable:

a. it must be written

30. Which of the following is one of the UCC's requirements for an instrument to be negotiable:

a. it must be written b. it must be an unconditional order or promise to pay c. it must be signed by the maker or drawer d. it must be payable on demand or at a specified time e. all of the other specific choices are correct

31. Which of the following is one of the UCC's requirements for an instrument to be negotiable:

a. it must be written b. it must state a certain sum of money c. it must be made out "to order" or "to bearer" d. it must be payable on demand or at a specified time e. all of the other specific choices are correct

58. Negotiable instruments do not include:

a. notes b. certificates of deposit c. checks d. promissory notes e. all of the other choices are negotiable instruments

111. According to the UCC, a draft may be:

a. payable in the future b. payable on sight c. payable within a certain time d. none of the other choices; those are features of a check e. all of the other specific choices are correct

70. With negotiable instruments, the party to receive payment is the:

a. payee

16. A financial institution that receives a promissory note has the right to:

a. sell the note to another party

120. A requires immediate payment by the drawee to the payee.

a. sight draft

7. Negotiable instruments function as:

a. substitutes for cash b. credit devices c. devices for making business deals easier d. are subject to Article 3 of the UCC e. all of the other choices

26. Negotiable instruments are governed by:

a. the UCC

54. TP sells franchises in the Old Fast Food chain. TP sells a franchise to Choi for $100,000 by cashier's check. Choi then hears that TP is going out of business and tries to stop payment on the check. TP has already transferred the money to a third party who meets the UCC's requirements for a holder in due course. The bank paid that third party. TP declares it is out of business. In a subsequent lawsuit:

a. the court will find that the third party is a holder in due course and, despite the fact that TP has defrauded Choi, not require the third party to repay Choi

139. Credit terms must specify which of the following:

a. the interest rate, if any, that applies to the sum owed b. the principal of the debt c. payment dates d. all of the other specific choices must be specified

64. The one who receives payment from a negotiable instrument is called:

a. the payee

140. Credit terms must include:

a. the principal of a debt b. the interest rate, if any, that applies c. the payment dates d. all of the other specific choices

41. Which of the following requirements is necessary to be a holder in due course:

a. the transferee must give value for the negotiable instrument b. the transferee must take the instrument without knowledge that it is overdue or defective c. the transferee must take the instrument in good faith d. all of the other specific choices are necessary

145. Most creditors seek information about debtors from:

a. trade associations b. credit reporting agencies c. customer financial statements d. banks e. all of the other choices

92. A commercial instrument where one party has a legal obligation to pay another party a certain sum of money and involves a maker and a payee only is called:

b. a note

118. The draft that requires immediate payment by the drawee to the payee, which is true of a check, is called:

b. a sight draft

66. The_________issues or creates the document that requests payment, probably from a bank, but it could be from another party.

b. drawer

46. If a negotiable instrument is transferred by negotiation, the transferee takes the instrument:

b. free of the transferor's responsibilities

52. If an instrument is found to be negotiable under the UCC, it may be freely traded without concern for any existing contract responsibilities if the instrument is in the possession of a holder in due course. To be a holder in due course, one must:

b. give value for the instrument, accept it without knowledge of any defects (for example, that it is overdue), and take the instrument in good faith

34. Which of the following is one of the UCC's requirements for an instrument to be negotiable:

b. it must state a certain sum of money

24. Although commercial paper may be either negotiable or nonnegotiable, only fall under the UCC.

b. negotiable instruments

158. For credit under a(n)_______the terms define the credit period available to the customer and any discounts offered for early payment.

b. open account

39. A(n) has the same contract responsibilities as an assignee under a nonnegotiable instrument.

b. ordinary holder

88. In Associated Home and RV Sales v. Bank of Belen, a bookkeeper for Associated forged many checks on the account at the Bank of Belen. Associated sued the bank for negligence to recover the stolen funds. The appeals court held:

b. the bank could be liable under the UCC for negligence ; that would be determined at trialr

86. Cashier's checks are frequently used in transactions where:

b. the seller demands guaranteed payment

18. If a negotiable instrument is_____ , the transferee takes the instrument free of any of the transferor's contract.

b. transferred by negotiation

51. Payment practices vary around the world. Islamic law is interpreted by many Muslims to mean that interest payments are prohibited by the Koran. In practice, this means that in countries that practice Islamic law:

c. borrowing is done by lending arrangements that pay the equivalent of interest

82. A form of check in which the bank is both the drawer and the drawee is called a:

c. cashier's check

99. When personal property is used as collateral to back up a loan, the note created is a:

c. collateral note

32. Which of the following is one of the UCC's requirements for an instrument to be negotiable:

c. it must be made out "to order" or "to bearer"

33. Which of the following is one of the UCC's requirements for an instrument to be negotiable:

c. it must be payable on demand or at a specified time

22. Governments disfavor bearer instruments because:

c. law enforcement agencies find it difficult to trace money transferred in bearer form

12. A(n) functions as a substitute for cash.

c. negotiable instrument

1. Every year, creditors have to absorb in unpaid debt:

c. over $20 billion

4. A(n) is a note promising to repay borrowed money, probably with interest.

c. promissory note

161. In a(n)______, the debtor makes a minimum monthly payment and more debt can be added to the account over time.

c. revolving account

167. A(n)_______allows more debt to be added to the account over time.

c. revolving account

9. Negotiable instruments are not

c. subject to Article 2 of the UCC

151. Capital refers to:

c. the debtor's financial condition

62. The one who issues or creates the document that requests payment, probably from a bank, is called:

c. the drawer

43. Which of the following requirements is necessary to be a holder in due course:

c. the transferee must take the instrument in good faith

20. If an instrument is made , the party in possession is required only to deliver the instrument to transfer it.

d. "to bearer"

157. When a company gives credit to a customer, it may create which of the following?

d. an installment account or an open account

148. A business that extends credit to buyers should establish:

d. credit and collection policies

147. As a creditor, a business should:

d. determine the debtor' ability to repay and establish debt collection practices

165. An open account means:

d. full payment is due within a fixed time period