Q&A Hero

Q: A check is not a substitute for cash.

Q: A divorce occurring after the execution of a will revokes dispositions of property to the former spouse.

Q: The Uniform Commercial Code governs checks.

Q: A security interest is not enforceable after the creditor's rights have at­tached to the collateral.

Q: To "publish" a will means to record it in the appropriate county office.

Q: A nuncupative will is an oral will.

Q: The person who owes the payment of a secured obligation is the secured party.

Q: Commercial Credit Company has in its possession an instrument dated May 1, 201 The instrument is payable to the order of Alpha Company "on June 1, 2013," for $5,000. In the upper left corner is an address for Beta Corporation10 Corporate Park Avenue, Chicago, Illinois'and in the lower right corner is the signature of "Delta, Inc., By Eve, President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank, President, May 5, 201" On the back is the signature of "Alpha Company By Gail, President." Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?

Q: Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie. The price of the shares is constantly fluctuating. Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase. Eppie agrees. Fund Investments buys the stock when the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services, which takes the check in good faith and without no­tice of Fund Investment' act. Hasty later learns that Fund Investments was not author­ized to fill in the check for $1,000 over the price. Is Hasty an HDC? If so, for how much?

Q: Generally, a cash deposit is not available for withdrawal until the next business day.

Q: The word "Mom" can qualify as a signature on a will.

Q: Burt, a mentally impaired person, is asked by Carl to sign a piece of pa­per that Carl says is an autograph book. In fact, the document is a note. If later sued on the note by an HDC a. Burt must pay the note. b. Burt's best defense would be fraud in the execution. c. Burt's best defense would be fraud in the inducement. d. Burt's best defense would be mistake.

Q: Generally, the funds represented by a deposited local check must be avail­able for withdrawal within one business day.

Q: A will must normally be attested to by two or three witnesses.

Q: Opalina asks Paolo, who does not understand English, to sign what Opalina says is an application to open a bank account. In fact, the "application" is a note. If sued on the note by an HDC a. Paolo must pay the note. b. Paolo's best defense would be fraud in the execution. c. Paolo's best defense would be fraud in the inducement. d. Paolo's best defense would be mistake.

Q: A bank cannot recover from a holder who cashes a check bearing a forged indorsement once the bank has accepted and paid the item.

Q: A bank that fails to detect an alteration to its customer's check is liable to the customer for the loss.

Q: Undue influence can occur when a named beneficiary is in a position to influence the making of a will.

Q: Cash National Bank is an HDC of a note for $1,000 on which there is the forged signature of "Dudley." If sued on the note by Cash a. Dudley must pay the note. b. Dudley's best defense would be fraud in the execution. c. Dudley's best defense would be material alteration. d. Dudley's best defense would be forgery.

Q: To execute a valid will, a testator must remember the "natural objects of his or her bounty."

Q: Jackson pays Phil in good faith for a promissory note. Phil warrants that the draft has not been altered. This warranty is a a. presentment warranty. b. consideration warranty. c. conditional warranty. d. fixed warranty.

Q: A customer must examine a bank statement and report any discovered forged signa­ture to recover from the bank for the forgery.

Q: In most states, a person must be sixteen years of age to execute a valid will.

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: A bank that pays a customer's check with a forged drawer's signature can generally pass the loss onto the customer.

Q: A testator is a decedent who dies without a will.

Q: A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.

Q: Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment, Biff's liability on this note is a. nothing. b. primary. c. secondary. d. conditional.

Q: An executor is a personal representative appointed by a court for a dece­dent who dies without a will.

Q: The death of a customer revokes a bank's authority to pay an item.

Q: Rubin writes a check drawn on his account at Clearwater Bank and payable to the order of Gwyn. The bank does not pay the check. Rubin is a. absolved of liability on the check. b. liable to Gwyn for the amount of the check. c. liable to the bank for the amount of the check. d. entitled to payment of the amount of the check from Gwyn.

Q: If no heirs are found, the property of a decedent is transferred to a charitable organization.

Q: Stature Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Stature takes it a. an unreasonable time after its due date. b. before its due date. c. on its due date. d. without noticing its due date.

Q: The incompetence of a customer revokes a bank's authority to pay an item.

Q: An insured's lack of an insurable interest is an absolute defense against payment.

Q: Because insurance law follows contract law, bad faith tort actions against insurers are not allowed.

Q: Dewey is the payee for a check written by Fred. Cash Credit Corporation (CCC) accepts the check from Dewey as part of a payment. CCC cannot become a HDC if a. the check has been transferred more than once. b. the check has been outstanding for one week. c. the check has been outstanding for more than ninety days. d. there are bankruptcy proceedings against Fred.

Q: An oral stop payment order is valid for thirty days.

Q: An insurer has a duty to avoid the payment of claims.

Q: Wilson buys a promissory note from Oli. The note is due on December 5. December 5 is a Sunday. The note is a. payable anytime the week of December 6. b. payable December 6. c. payable on December 5 only. d. defective.

Q: A stale check is one that has been outstanding for longer than one month.

Q: An applicant for insurance has a duty to disclose only material facts that the insurer asks for.

Q: Elinor performs ten hours of house cleaning for Zack in exchange for a promissory note for $400. At the time that Elinor accepts the note, she is aware that bankruptcy proceedings are being filed against Zack. Elinor a. can obtain HDC status. b. cannot obtain HDC status, because she knows that there are bankruptcy proceedings against Zack. c. cannot obtain HDC status, because she did not fulfill the value requirement. d. cannot obtain HDC status, because she did not fulfill the good faith requirement.

Q: A written stop payment order is valid for fourteen days.

Q: A bank is obligated to pay an uncertified check presented less than six months from its date.

Q: The words used in an insurance contract are interpreted against the party who applied for the policy.

Q: Jill, in good faith and for value, gets from Kiley a negotiable bearer in­stru­ment. Jill does not know that Kiley stole the instrument. Jill is a. an HDC. b. not an HDC, because Kiley did not acquire the instrument for value. c. not an HDC, because Kiley did not acquire the instrument in good faith. d. not an HDC, because the instrument is a bearer instrument.

Q: A bank has no right to charge a customer's account for the amount of a stale check.

Q: Muni Investment Company signs a check payable to Enterprise Lenders, Inc., to buy a promissory note executed by Fallow Corporation. This check 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: Misstatements or misrepresentations in an application for insurance can void a policy.

Q: A drawer is liable to the holder of a check if the check is not honored.

Q: Beth, an accountant for Credits & Debits, acquires a negotiable instru­ment from Ellen by promis­ing to pay its face value in thirty days. Beth ac­quires the status of an HDC when she a. acquires possession of the negotiable instrument. b. agrees with Ellen to buy the negotiable instrument. c. pays the face value due on the instrument. d. transfers the instrument to another party.

Q: Under a coinsur­ance clause, a homeowner who insures a home for 80 percent of its value can recover only 80 percent of the cost for damage to it.

Q: Insurance coverage is never effective until a formal written policy is issued.

Q: A check carries with it an implied promise to reimburse the bank for paying the check.

Q: Jeff's grandmother is the payee of a promissory note for $7,500. Jeff's grandmother gives Jeff the note for his sixteenth birthday. Jeff is a. an HDC. b. not an HDC, because he received the note as a gift. c. not an HDC, because he is a minor. d. not an HDC, because the note was for less than $10,000.

Q: If a life insurance applicant pays a premium but dies before the physical exam, there is obviously no coverage.

Q: At 1 a.m., on the sidewalk in front of Ace Credit Corporation, which is closed, Ben buys a $500 promissory note for $50 from Curt. When pre­sented with Ben's demand for payment, Diann, the maker of the note, could successfully claim that Ben a. acquired the note with notice that it was overdue. b. did not acquire the instrument in good faith. c. did not give value for the instrument. d. none of the choices.

Q: When a check "bounces," its holder can resubmit the check later, hop­ing that suf­ficient funds will be available.

Q: A coinsurance clause provides that two or more people will be covered by the same life insurance policy.

Q: Entrepreneur Auto Rentals owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver 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: Generally, a bank has no obligation to pay a customer's overdrafts.

Q: A bank is subject to a civil suit if its customer writes a bad check.

Q: A loss sustained between the time of application and the delivery of an insurance policy may not be covered.

Q: To buy a stuffed cow, Ken executes a check "pay to Laura or bearer" and gives it to Laura, who does not own a stuffed cow. This check is a. negotiable. b. nonnegotiable, because it does not indicate a specific payee. c. nonnegotiable, because it may be a joke. d. nonnegotiable, because Laura does not own a stuffed cow.

Q: State law may mandate that an incontestability clause be included in an insur­ance policy.

Q: Efron transfers an instrument to First Citizens Bank. This is not a negotiation unless a. the parties bargained over the amount paid for the instrument. b. the transfer is an assignment. c. the instrument is a negotiable instrument. d. the transfer includes rights under a contract.

Q: A bank that has certified a check is under no obligation to accept it.

Q: An insurance application is usually not part of the insurance contract.

Q: Fred has six nieces, ages five to sixteen. He writes an order instrument for $50 that states, "Pay to the order of my niece." The order instrument isa. negotiable.b. nonnegotiable, because the amount of money is less than $500.c. nonnegotiable, because it is illegal to write an order instrumentpayable to a relative.d. nonnegotiable, because there is no specific person identified.

Q: Certified checks are instruments that have been accepted for payment by the institutions on which they are drawn.

Q: A party must own property to have an insurable interest in it.

Q: A check is a special type of certificate of deposit.

Q: Ralph signs an instrument promising to pay a total of $10,000 to Martha in $1,000 monthly installments with the final payment being made on August 1. Ralph unexpectedly inherits $10,000 from his aunt on May Ralph may a. not complete his $10,000 payment before August 1. b. complete his $10,000 payment before August 1. c. increase his monthly payments by five percent, but not more. d. increase his monthly payments by ten percent, but not more.

Q: A person has an insurable interest in property if he or she would sustain a financial loss from damage to the property.

Q: UCC Articles 3 and 4 govern checks.

Q: Maria signs an instrument payable to the order of National Loans, Inc., "on or before" June 15. This instrument is a. negotiable. b. nonnegotiable, because the maker can move up the payment date. c. nonnegotiable, because moving up the payment date is optional. d. nonnegotiable, because the exact payment date cannot be deter­mined from the face of the instrument.

Q: A business firm may have an insurable interest in the life of a key employee.

Q: Tiny authorizes United Bank to make transfers from his account to make payments on his debt to Vic's Auto Dealership, which sold Tiny the car that serves as collateral for the debt. After three payments, Vic's repos­sesses the car and refuses to return it. Tiny phones the bank to stop the payments and follows up with a confirm­ing letter. The bank fails to stop the next two payments, and Vic's refuses to refund anything. Can Tiny get his money from the bank? Explain.

Q: Kris wants one of Jasmine's purebred Persian kittens. Kris signs an instrument in which she promises to pay Jasmine for a kitten. The instrument will be negotiable if it is payable in a. goods of equal market value. b. money. c. any of the choices. d. shares in stock.