Law Quiz 3
A holder in due course takes a negotiable instrument free of all of the following defenses except:
Exactly two of the above. 1. A defense that the maker was tricked into signing the note in the belief that the note was only a receipt. 2. A defense that the note is void under state law because its making was induced by duress.
At 1 a.m., on the sidewalk in front of EZ Credit Corporation, which is closed, Frank buys a $500 promissory note for $50 from Greg. When presented with Frank's demand for payment, Diane, the maker of the note, could successfully claim which of the following against Frank?
Frank did not acquire the note in good faith.
Tony and Vincent had a $600.00 wager on the outcome of a sporting event. Tony lost the wager. Tony was unable to immediately honor his obligation. Vincent agreed to accept a $650.00 negotiable promissory note payable in three months. Tony executed and delivered aforesaid instrument. Three weeks later, Vincent sold the note to George for $575.00, telling George that the note represented a short-term loan by Vincent to enable Tony to pay some unexpected medical expenses. Unknown to Vincent and George, state law makes gambling on sporting events illegal. Tony discovered the state law shortly before the note becomes due and asserts this defense against George when George demands payment on the due date. The illegality of the wager:
Gives Tony a defense to payment that is good against George, even if George is a holder in due course, if the state law renders Tony's obligation void.
John, a vending machine distributor in Washington, D.C., needed money to cover interest payments on loans incurred to pay for a fleet of service trucks. Not wanting to alert his primary lender, First Bank, to his potential insolvency, John contacted his friend Craig for money. Craig agreed to lend John $10,000.00 out of his own pocket, and he drafted a note for John to sign. The note contained the following terms: (1) one year from the date of issue, the note required John to repay Craig or his order the principal in the amount of $10,000.00 plus interest at 4% adjusted and compounded quarterly; (2) Craig had the right to accelerate payment in certain circumstances which cross-referenced a document entitled "Acceleration Schedule" for the terms of that acceleration right; and (3) John's obligation to pay Craig would be extinguished if John were to default on other certain loans made by First Bank. Is John's note a negotiable instrument?
No, because John's obligation on the note is conditioned on the status of his obligation to First Bank.
First National Bank is a possible holder in due course of a note for $1,000.00 on the back of which there is the indorsement of the payee "Bob Adams." "Bob" negotiated the note to the bank. Two days later, Bob Adams demands the bank pay him for the note claiming that his indorsement was forged. If, in fact, the forgery happened, the note was not properly payable and the Bank converted the note and owes Bob Adams the money.
True
To finance the purchase of an electric guitar and amplifier from Leon's Guitars, Milo signs an instrument promising to pay to "National Lenders" $1,800 with interest in installments and the final payment due August 15, 2016. To be negotiable, this instrument must include on its face
no conditional promises or orders to pay.
On behalf of Bubbly Drinks Company, Calvin signs an instrument in which he promises to deliver 100 cases of soda as payment to Dispatch & Delivery, Inc., on April 1. This instrument is
none of the above are correct.
Which of the following situations effectively transfers an order document?
Delivery and indorsement.
Harley signs a check payable to Pro Accountants, P.C., and gives it to Pro, leaving the amount blank but authorizing the firm to fill in the check for $10,000. Pro fills in $15,000 and negotiates the check to Valley Bank, to whom Pro owes $15,000. Valley Bank, an HDC, can enforce the check for
$15,000.
Bowman writes a check on his account at 2001 Odyssey Bank to Hal, a famous computer inventor. The person purporting to be Hal is an imposter, however, named Sal. Sal negotiates the check to 2001. Liability for the check is on:
Bowman.
Chuck is the maker of a $200,000 promissory note payable to Investors Corporation. Investors indorses the note to Equity Lenders, which in turn indorses it to Select Holdings LLC, which then indorses it to Global Bank, the present holder. Global Bank properly presents the note to Chuck for payment, but he dishonors it. With timely notice to the proper parties, from whom may Global Bank collect payment?
Investors, Equity Lenders, or Select Holdings.
Personnel Company draws a check payable to Felix. Felix indorses the back and negotiates the check to Guaranty Bank. Who is primarily liable on the check?
No one is primarily liable. bc only makers and accepted drawees are prim liable; drawee had not accepted yet
In which of the following scenarios would the principal not be liable for the acts of the agent?
Olivia, Physicians Clinic's agent, is not authorized to sign checks or notes on its behalf. Despite the lack of authority, Olivia issues a note "payable to the order of Loan Company [signed] Physicians Clinic, by Olivia."
Len makes a gift of a check to Millie who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Millie is
a holder.
Edna is the payee of a bearer instrument—a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is
not an HDC, because he did not yet give value for the instrument.