Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Business Law
Q:
John writes a check to Kay as payment for a DVD player but soon discovers the player is broken. He goes to the drawee bank and orally authorizes Larry, a bank officer, to stop payment on the check. This order is valid for
a. fourteen days.
b. fourteen months.
c. six days.
d. six months.
Q:
Fact Pattern 27-1
Amy takes her car to Better Fix-It, Inc., which repairs the car and bills Amy for $500. Amy writes out a check drawn on Capital Bank, but later, believing that Better did not repair the car properly, issues a stop-payment order.Refer to Fact Pattern 27-1. Capital Bank pays the check. Capital
a. can sue Amy for a wrongful stop-payment order.
b. can sue Better for breach of contract.
c. can sue no one because it paid a check that was not properly payable.
d. is liable for Amy's loss due to the wrongful payment.
Q:
Fact Pattern 27-1
Amy takes her car to Better Fix-It, Inc., which repairs the car and bills Amy for $500. Amy writes out a check drawn on Capital Bank, but later, believing that Better did not repair the car properly, issues a stop-payment order.Refer to Fact Pattern 27-1. Capital Bank
a. is liable to Better for the amount of the check.
b. must stop payment if Capital has a reasonable time to act.
c. need not stop payment unless Amy had a valid reason to act.
d. need not follow Amy's order unless the check was certified.
Q:
After Ben's death, his heir Cathy asks his secretary Elin to notify Ben's bank, First National Bank. On being notified, First National can pay or certify checks drawn by Ben, on or before the date of his death, unless Cathy asks to stop all payments, for
a. an indefinite period.
b. sixty days after the date of death.
c. ten days after the date of death.
d. thirty days after the date of death.
Q:
Quinn writes a check to Ron on May 1 that is drawn on Quinn's account at State Bank. Ron presents the check on December 15. The bank is
a. not obligated to pay the check under any circumstances.
b. not obligated to pay the check unless Ron can show he is an HDC.
c. obligated to pay the check if Quinn has sufficient funds in his account.
d. obligated to pay the check under any circumstances.
Q:
City Bank agrees to honor Delta, Inc.'s checks even when its account has insufficient funds. Edie, Delta's bookkeeper, writes the checks. Later, the bank refuses to pay an item payable to Fine Supply Company that would create an overdraft. This is
a. a wrongful dishonor.
b. Delta's liability.
c. Edie's responsibility.
d. Fine's loss.
Q:
First National Bank agrees to honor Glen's checks even when his account has insufficient funds. Later, the bank refuses to pay an item payable to Holly that would create an overdraft. The bank is
a. liable to Glen only.
b. liable to Glen and Holly.
c. liable to Holly only.
d. not liable to Glen or Holly.
Q:
Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira. Mira presents the check for payment to Local Bank, which dishonors it. The party most likely liable to Mira is
a. Kip in a civil suit.
b. Kip in a criminal prosecution.
c. Local Bank in an administrative proceeding.
d. neither Kip nor Local Bank.
Q:
Sue receives a check from Temp Persons, Inc. (TPI). She takes the check to United Bank, TPI's bank, which refuses to cash it. She attempts to deposit the check in Village Bank, her bank, which also refuses to accept it. Sue can recover from
a. neither United nor Village.
b. United only.
c. United or Village.
d. Village only.
Q:
First Community Bank agrees to accept a check by setting aside sufficient funds to cover the amount. This check is considered
a. cashed.
b. certified.
c. deposited.
d. provisionally credited.
Q:
Federal laws that prohibit unauthorized access to electronic communications may apply to e-money transactions.
Q:
Digital cash consists of funds stored on microchips and other computer devices.
Q:
A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors.
Q:
Most checks are processed manually.
Q:
A payor bank is also a collecting bank.
Q:
Generally, the funds represented by a deposited local check must be available for withdrawal within one business day.
Q:
A bank that pays a customer's check with a forged indorsement must recredit the customer's account.
Q:
A customer who fails to examine a bank statement and report a forged signature may be liable for later forgeries by the same wrongdoer.
Q:
A bank can recover from a holder who cashes a check bearing a forged drawer's signature if the holder knew of the forgery.
Q:
A bank is never liable for failing to honor a customer's stop-payment order.
Q:
An oral stop payment order is valid for fourteen days.
Q:
A stale check is one that has been outstanding for longer than one month.
Q:
A bank is not obligated to pay an uncertified check presented more than six months from its date.
Q:
Once a check "bounces," a holder cannot resubmit it for payment.
Q:
A drawer is liable to the holder of a check if the check is not honored.
Q:
A drawee bank may be liable to its drawer customer if the bank refuses to honor the drawer's check when there are sufficient funds in the account.
Q:
A person who writes a bad check is subject to a civil suit only.
Q:
To transfer checkbook dollars among different banks, each bank acts as an agent of collection for its customer.
Q:
A bank that has certified a check is under no obligation to accept it.
Q:
A cashier's check is an instrument in which a bank draws a check on itself.
Q:
Alan transfers a note, for consideration, to Brenda by blank indorsement and delivery. Brenda transfers the note to Carl, who takes it in good faith. What does Alan warrant to Carl?
Q:
Dale issues a check for $4,000, dated June 1, to Ellen. The check is drawn on First Federal Bank. Ellen indorses the check and transfers it to Gene. What will trigger the liability of Dale and Ellen on the check?
Q:
Perfect Products sells shoddy goods to consumers for promissory notes, and sells the notes to Quik Finance Company. Perfect Products goes out of business. The consumers may be able to avoid payment on the notes under
a. Article V of the U.S. Constitution.
b. FTC Rule 433.
c. the shelter principle.
d. UCC Article 3.
Q:
Alpha Company gives a $3,000 promissory note to Best Delivery Service to deliver a load of computer chips to Alpha's plant. The chips are contaminated during transit, and are useless to Alpha on delivery. Alpha's best defense to payment on the note is
a. breach of warranty.
b. failure of consideration.
c. illegality.
d. nondelivery of an instrument.
Q:
Dandy Furniture Store borrows $100,000 at 6 percent interest from Easy Loan Company and signs a promissory note for that amount. Easy changes the amount of the note to $120,000 and increases the rate to 8 percent. Easy materially altered the note when it changed
a. neither the amount nor the interest rate
b. the amount and the interest rate.
c. the amount only.
d. the interest rate only.
Q:
Chris convinces Dion, who does not understand English, to sign a $1,000 note that Dion believes is an application for a credit card. Chris negotiates the note to EZ Finance Company. Dion
a. can avoid payment on the note even if EZ is an HDC.
b. can avoid payment on the note only if EZ is a holder.
c. must pay EZ the amount that it paid for the note.
d. must pay the note in full.
Q:
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.
Q:
Quincy signs a check payable to Regal Investors, Inc., and gives it to Regal, leaving the amount blank but authorizing Regal to fill in the check for $1,000. Regal fills in $1,500 and negotiates the check to State Bank, to whom Regal owes $1,500. State Bank, an HDC, can enforce the check for
a. $0.
b. $500.
c. $1,000.
d. $1,500.
Q:
City Bank issues to Dave a cashier's check. Evan steals the check, forges Dave's signature, adds his own signature, and cashes it at First County Bank, which obtains payment from City. Dave discovers the theft and obtains a replacement check from City, which sues First. The court will likely rule in favor of
a. City, because First breached the presentment warranty that there are no unauthorized indorsements on the check.
b. City, because First can recover the money from Evan.
c. First, because City breached the presentment warranty that there are no unauthorized indorsements on the check.
d. First, because City can recover the money from Dave.
Q:
Dina, an accountant for Eagle, Inc., issues company checks payable to nonexistent persons drawn on Eagle's account at First State Bank. Dina indorses the checks and deposits them in her account. Eagle discovers the theft and demands that First recredit its account. First's best defense is that
a. Dina was not authorized to issue the checks.
b. Eagle was in a better position than First to prevent the theft.
c. First did not know that the checks were not to be paid.
d. the checks were the property of Eagle, not First.
Q:
Aron, an employee of Beta Company, forges the signature of Chloe, Beta's president, on a Beta check and cashes it at Delta Bank. Chloe would ratify Aron's actions by
a. asking the bank to prosecute Aron for forgery.
b. discharging Aron from Beta"˜s employment.
c. entering into a repayment agreement with Aron.
d. filing criminal charges against Aron herself.
Q:
Fact Pattern 26-2
Ilsa, an agent for Joe, enters into a deal with Kappa Holdings, Inc., to buy a café.
Refer to Fact Pattern 26-2. If Ilsa signs her name followed by the word "agent" on the check without identifying Joe, then she is most likely personally liable on the check
a. only if Ilsa would have bought the café herself.
b. under any circumstances.
c. unless Ilsa reasonably believes that she is acting as Joe's agent.
d. unless Joe knows that Ilsa is acting as his agent.
Q:
Fact Pattern 26-2
Ilsa, an agent for Joe, enters into a deal with Kappa Holdings, Inc., to buy a café.
Refer to Fact Pattern 26-2. If Ilsa signs only her name on the check without noting that she is Joe's agent, then she is most likely personally liable on the check
a. only if Ilsa would have bought the café herself.
b. under any circumstances.
c. unless Ilsa reasonably believes that she is acting as Joe's agent.
d. unless Joe knows that Ilsa is acting as his agent.
Q:
Fact Pattern 26-2
Ilsa, an agent for Joe, enters into a deal with Kappa Holdings, Inc., to buy a café.
Refer to Fact Pattern 26-2. If Ilsa signs both her name and Joe's name on a check to buy the café without noting on the instrument that she is Joe's authorized agent, then she is most likely personally liable on the check
a. only if Ilsa would have bought the café herself.
b. under any circumstances.
c. unless Ilsa reasonably believes that she is acting as Joe's agent.
d. unless Joe knows that Ilsa is acting as his agent.
Q:
Fact Pattern 26-1
Holly writes a check on her account at Investment Bank to Jerry to pay a debt. Jerry negotiates the check by indorsement to Kelly, who negotiates the check by indorsement to Lisa, who presents it for payment to Interstate Bank.Refer to Fact Pattern 26-1. If Investment Bank dishonors the check, Lisa can obtain payment from Kelly
a. if Lisa timely notifies Kelly.
b. only if Holly refuses to pay the check.
c. only if Holly and Jerry refuse to pay the check.
d. under no circumstances.
Q:
Fact Pattern 26-1
Holly writes a check on her account at Investment Bank to Jerry to pay a debt. Jerry negotiates the check by indorsement to Kelly, who negotiates the check by indorsement to Lisa, who presents it for payment to Interstate Bank.Refer to Fact Pattern 26-1. If Investment Bank dishonors the check, Lisa can obtain payment from Jerry
a. if Lisa timely notifies Jerry.
b. only if Holly refuses to pay the check.
c. only if Holly and Kelly refuse to pay the check.
d. under no circumstances.
Q:
Ed acquires a check drawn on First National Bank. To present the check for payment, he may use any commercially reasonable
a. electronic or written means of communication only.
b. oral or written means of communication only.
c. electronic, oral, or written means of communication.
d. written means of communication only.
Q:
Fact Pattern 26-1
Holly writes a check on her account at Investment Bank to Jerry to pay a debt. Jerry negotiates the check by indorsement to Kelly, who negotiates the check by indorsement to Lisa, who presents it for payment to Interstate Bank.Refer to Fact Pattern 26-1. Kelly is
a. not liable for payment under any circumstances.
b. primarily liable.
c. secondarily liable.
d. simultaneously liable.
Q:
Fact Pattern 26-1
Holly writes a check on her account at Investment Bank to Jerry to pay a debt. Jerry negotiates the check by indorsement to Kelly, who negotiates the check by indorsement to Lisa, who presents it for payment to Interstate Bank.Refer to Fact Pattern 26-1. Holly is
a. not liable for payment under any circumstances.
b. primarily liable.
c. secondarily liable.
d. simultaneously liable.
Q:
Ann is the maker of a $1,000 promissory note in favor of Bob. Bob indorses the note to Cody who, in turn, indorses it to Dru, the present holder. The party entitled to recover payment from Cody is
a. Ann.
b. Bob.
c. Dru.
d. no one.
Q:
Tina indorses a check. Tina is potentially liable for
a. any amount paid on the check after Tina indorsed it.
b. any amount paid on the check at any time.
c. any amount paid on the check before Tina indorsed it.
d. the amount paid to Tina when she indorsed the check.
Q:
Ada is the maker of a note, on which Bart is secondarily liable. Cash & Credit Company (C&C) is the current holder of the note. Bart will be obligated to pay the note if
a. Ada defaults on the note.
b. C&C breaches a transfer warranty.
c. C&C negotiates the note to Delta Collection Agency, a third party.
d. C&C presents the note for payment.
Q:
Accidental destruction of a negotiable instrument cancels it.
Q:
When the drawee of an unaccepted draft or check pays to a holder the amount due in full, all parties to the instrument are discharged.
Q:
The defense of minority is always a universal defense.
Q:
The defense of illegality is always a personal defense.
Q:
When a person signs a negotiable instrument under extreme duress, the instrument is enforceable only by an HDC.
Q:
Personal defenses defeat the claims of HDCs.
Q:
A drawer's discharge in bankruptcy will defeat the claim of an HDC for payment on a check issued by the drawer.
Q:
Fraud in the execution occurs whenever someone signs an instrument before all essential terms have been completed.
Q:
A person who transfers an instrument warrants to any other person who in good faith accepts it (with exceptions) that it has not been altered.
Q:
A drawer who is induced by an imposter to issue a check in the name of an impersonated payee can avoid payment on the check to an innocent holder.
Q:
An unauthorized signature binds the person whose name is forged.
Q:
An authorized agent may be personally liable on an instrument if the agent signs the agent's name but not the principal's name.
Q:
In general, an agent must clearly indicate that he or she is signing on behalf of a clearly named principal to bind the principal.
Q:
An accommodation maker is secondarily liable on an instrument.
Q:
To properly present a draft for payment, the holder must present it to the drawer.
Q:
A drawer's liability does not arise until presentment and notice of dishonor.
Q:
A maker is secondarily liable on an instrument.
Q:
Signature liability extends to any person who signs a negotiable instrument.
Q:
A signature may be handwritten.
Q:
A signature may be typed.
Q:
Diner's Café receives daily shipments of dairy products from Eagle Dairy, Inc. The price is $900 per month. Diner's pays six months in advance with a note for $5,400. One month later, Eagle sells the note to First National Bank for $5,100. At the time the note is sold, Eagle is
a. an HDC for $5,400.
b. an HDC for $5,100.
c. an HDC for $900.
d. not an HDC.
Q:
A+ Auto Rentals owes Apex Auto Dealership $2,000. A+ executes a note to Apex as security for the debt. This security
a. does not constitute sufficient consideration for HDC status.
b. does not satisfy the value requirement for HDC status.
c. satisfies the consideration requirement for HDC status.
d. satisfies the value requirement for HDC status.
Q:
Edie is the payee of a bearer instrumenta promissory note in the amount of $1,000. Frank offers to irrigate Edie's ranch next week in exchange for the note. Edie agrees and delivers the note to Frank. Frank is
a. an HDC, because he promised to perform services at a future date.
b. an HDC, because the transferor was the original payee on the note.
c. not an HDC, because he did not acquire the instrument in good faith.
d. not an HDC, because he did not yet give value for the instrument.
Q:
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.
Q:
To pay property taxes, Alpha Corporation signs a check payable to "Beth, County Tax Collector." Before Beth negotiates the check, Dan replaces her in office. The check can be negotiated by
a. Alpha only.
b. Beth, Dan, or whoever holds the office of county tax collector.
c. Beth only.
d. no one.
Q:
To pay for a new desk bought at Office Outlet, Pete makes a check payable 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.
Q:
Todd indorses a check, "Pay to Interstate Trucking if they deliver the lumber by May 1, 2007." This is
a. a blank indorsement.
b. a qualified indorsement.
c. a restrictive indorsement.
d. a special indorsement.
Q:
Joe receives a check from Interstate Transport Corporation and indorses it "without recourse." This is
a. a blank indorsement.
b. a qualified indorsement.
c. a restrictive indorsement.
d. a special indorsement.