Business Law | Ch. 20 - 24

A written order signed by one person requiring the person to pay a fixed amount at a particular time is a(n): a. draft b. promissory note c. third party beneficiary d. executory contract

A

A(n) _________ note is secured by personal property. a. collateral b. promissory c. executory d. real estate

A

Which of the following effectively creates negotiable order paper? a. Pay to the order of the Clerk of Jackson County Court b. Pay to the order of cash c. Pay to the order of a county revenue official d. Pay to the order of the bearer

A

Which of the following is NOT payable on demand or at a definite time sufficient for negotiability? An instrument which: a. is payable when the payee graduates from college. b. includes a prepayment clause. c. has no time for payment specified at all. d. provides for payment at a fixed time in the future.

A

Which of the following is true regarding the acceptance procedure for a draft? a. The drawee may use other words to indicate acceptance to the terms of instruments, but the words used must be written on the instrument. b. If the drawee refuses to accept a draft or to accept it in a proper way, the holder of the draft cannot return the draft to the drawer. c. By accepting a draft, the drawee admits to the payee's capacity to indorse and the genuineness of the payee's indorsement. d. The drawee's signature alone on the draft is insufficient to constitute a valid acceptance, the word "accepted" needs to be added.

A

Which of the following is true regarding the effect of date and place on the negotiability of the instrument? a. It is not necessary to mention the date on an instrument to make it negotiable. b. It is mandatory to mention the name of the place where the instrument was drawn, in order to ensure negotiability. c. The name of the place where the instrument is payable needs to be specifically mentioned for an instrument to be negotiable. d. Antedated or postdated instruments are generally negotiable.

A

Which of the following is true regarding the liabilities of an indorser? a. The warranty liability of a qualified indorser is the same as that of an unqualified indorser. b. The warranties of an unqualified indorser extend only to the immediate purchaser, and not to the subsequent holders. c. A qualified indorser, by making an indorsement, agrees to pay the face amount of the instrument to any subsequent holder in the event of a default from the primary party. d. The words "without recourse" added immediately before the signature release the indorser from warranty liability.

A

A(n) __________ indorsement has the effect of qualifying, thus limiting, the liability of the indorser. a. restrictive b. qualified c. special d. blank

B

A(n) ___________________ is a draft drawn by the seller on the purchaser of goods sold and accepted by such purchaser. a. bank draft b. trade acceptance c. certified check d. money order

B

Which of the following is true regarding the issue and delivery requirements of a negotiable instrument? a. Bearer payer requires an indorsement, and a physical transfer of the instrument alone does not affect negotiation. b. The issuing of an instrument is not considered to be effective if the delivery of the instrument is not absolute. c. If a negotiable instrument is only partially filled in and signed before delivery, the maker or drawer is not liable for it if the blanks are filled in according to instructions. d. To negotiate order paper, it must be either indorsed by the person to whom the paper is then payable or delivered to the new holder.

B

Which of the following is true regarding the rules for holders of consumer paper? a. These laws do not help consumers to recover the money they have paid for goods through a credit card. b. The holder in due course rules are inapplicable to consumer sales, that is, no subsequent holder can be a holder in due course in consumer credit contracts. c. The laws regarding the rights of a holder of consumer paper are uniform in all the states. d. The state laws are applicable even to the credit card sales on a credit card issued by someone other than the seller.

B

Which of the following types of promissory notes is payable to the bearer and hence can be negotiated by delivery? a. Collateral notes b. Coupon bonds c. Registered bonds d. Debentures

B

A drawer or an individual who is liable on an instrument cannot raise a defense against a holder in due course when: a. discharge in bankruptcy has been granted to the drawer. b. the law that is applicable makes the transaction illegal and specifies that the instrument is unenforceable. c. an incomplete document is delivered to a holder who then negotiates it to a holder in due course. d. the drawer is a minor who is incapable of making such agreements.

C

A holder in due course of a negotiable instrument cannot demand payment from the drawer: a. when the document was negotiated to him by a thief. b. when the drawer delivers an incomplete document to the holder to complete it. c. when a drawer raises a defense stating his signature has been forged. d. when the drawer raises an objection stating that the instrument was delivered for a specific purpose but was not used for it.

C

A restricted indorsement: a. prohibits further negotiation of the instrument. b. has no words other than the name of the indorser. c. is ineffective with respect to anyone other than the indorser and indorsee. d. allows the use of the instrument for purposes beyond the stated use.

C

One who negotiates a bearer instrument by ____________ alone does not guarantee payment but it liable to the immediate transferee as a warrantor of the genuineness of the instrument, of title to it, of the capacity of prior parties, and of its validity. a. indorsement b. acceptance c. delivery d. negotiation

C

The owner of a negotiable instrument can transfer ownership to another party by: a. making a cash payment to another party. b. executing a bill of sale regarding the instrument to the other party. c. signing the back of it and delivering it to another party. d. asking a bank to pay the due amount to the specified person.

C

Which of the following defenses cannot be raised against a holder in due course? a. Discharge in bankruptcy proceedings b. Minority c. Conditional delivery d. Forgery

C

A(n) _________ may acquire rights superior to those of the original owner when a negotiable instrument is transferred by negotiation. a. surety b. merchant c. creditor d. holder in due course

D

Order paper differs from bearer paper in that order paper: a. may be paid to nay person who is in possession of the paper. b. may be made payable to cash, or any other indication that does not purport to designate a specific person. c. is negotiated by merely handing the paper to another person. d. is negotiated only be indorsement of the person to whom it is then payable.

D