Reference no: EM131346358
1. A holder of a negotiable instrument is:
A) anyone who has possession of an instrument
B) anyone who is rightfully in possession of an instrument
C) anyone who is in possession of a bearer instrument or anyone who is in possession of an instrument payable to that person
D) none of the above
2. Stanley, who owes Milton money, indorses a check to him with the term "without recourse." The instrument later is dishonored. What liability does Stanley have on the instrument?
a. He has no liabilities on the instrument.
b. He has to pay Milton in case the instrument defaults.
c. He has primary liabilities.
d. none of the above
3. Chris convinces Dion, who does not read English to sign a$1,000 promissory note made out to Chris. He tells Dion it is an application for a credit card for Dion. Chris negotiates the note to Tom. Dion:
a. Can avoid payment on the note even if Tom is a holder in due course
b. Can avoid payment on the note unless Tom is a holder in due course
c. Must pay the note in full
d. None of the above
4. Bill pays for a snow blower at Ace Hardware with a check. Ace deposits the check into its account at PNC but then Ace fails to send the correct snow blower to Bob. PNC can be a holder in due course if it proves:
a. it accepted the check in good faith
b. the check was given as value for the snow blower
c. it did not notice any defect on the check
d. all of the above
5. Dan’s checkbook was stolen by thief. Thief forged Dan’s signature on a check and issued it to Penny, who was unaware of the forgery. Penny presented the check to First Bank, the drawee bank. First Bank paid the check and charged Dan’s account for the amount of the check. In this case:
a. First Bank is entitled to charge Dan’s account and does not have to recredit his account
b. First Bank must recredit Dan’s account
c. First Bank must recredit Dan’s account unless he is a minor
d. None of the above
6. Jennifer signs a promissory note to pay $2,500 to Clara. Clara negotiates the instrument and indorses it to Anthony. Anthony alters the note to make the payment amount $25,000 and negotiates the note to Nicholas. If Nicholas presents the note to Jennifer for payment, how much, if anything is Jennifer obligated to pay?
a. $25,000
b. $22,500
c. $2,500
d. none of the above
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