Q&A Hero

Q: A person can insure anything in which he or she has an insurable interest.

Q: Hoppy steals two checks from Eagle Retail Stores, Inc.: a blank check and a check payable to the order of General Supplies Company (GSC), drawn on Eagle's account with First National Bank. Hoppy forges Eagle's signa­ture on the blank check and makes it payable to himself. Hoppy forges GSC's indorsement on the back of the check payable to GSC, and adds "Pay to the order of Hoppy." At Friendly Credit, Inc., Hoppy indorses the back of both checks with his own name and gives them to Friendly for cash. Friendly does not know about the theft or the forged signatures and presents the checks to First National, which pays them. Eagle, which was not negli­gent, discovers the forgeries and asks First National to recredit its ac­count. Who suffers the loss on each check?

Q: Kelly signs an instrument in favor of Leo that states it is "subject to a cer­tain agreement between Kelly and Mona." This instru­ment is a. negotiable. b. nonnegotiable, because it is made subject to a separate agreement. c. nonnegotiable, because it refers to a separate agreement. d. nonnegotiable, because Kelly and Mona are not the same persons.

Q: Insurance is classified according to the amount of the payment on a claim.

Q: Paris knowingly divulges to Media Exposure magazine information about Randy's e-money payments to City Bank. The payments were in trans­mission to City Bank when Paris, without the consent of Randy or City Bank, discovered and revealed them. This may be a violation of a. the Electronic Communications Privacy Act. b. the Federal Reserve Board's Regulation E. c. the Right to Financial Privacy Act. d. the Uniform Electronic Transactions Act.

Q: Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is a. negotiable. b. nonnegotiable, because it does not include an express promise to pay. c. nonnegotiable, because it does not recite any consideration. d. nonnegotiable, because it does not state any conditions to payment.

Q: Andy leases to Burgertown Franchise Corporation a 10,000 square-foot building under a written lease with a twenty-year term, rent payable an­nually. The lease includes a clause stating that Burgertown is re­sponsi­ble for making all necessary repairs, including rebuilding the structure after its destruction by any cause beyond Andy's control. The lease does not include a clause concerning its assignment. One day after the tenth rental payment, Burgertown, without Andy's knowledge or consent, as­signs its interest in the lease to Chicken Hut Restaurants, Inc. Mean­while, Andy dies and Dotty inherits Andy's interest in the building. Without the knowledge or consent of either Burgertown or Chicken Hut, Dotty sells the building to Earnest Investments, Inc. The next month, the building is destroyed in the flood of a nearby river. Burgertown rebuilds it and files a suit against Earnest for the expense. Earnest responds that the lease has terminated. Is Earnest correct? If so, when did the lease termi­nate? If not, is Earnest liable for the cost of re­building the structure? Why or why not?

Q: To borrow money to finance the start-up of his business, Bob executes an instrument in favor of City Bank. For the instru­ment to be negotiable, the signature must be a. anywhere on the instrument. b. anywhere on the lower half of the instrument only. c. in the lower left-hand corner of the instrument only. d. in the lower right-hand corner of the instrument only.

Q: Jai owns an orchard behind Key's house and property. The only access to the orchard is Key's driveway, which Jai uses to get to her orchard. Jai sells the orchard to Laurentz. Can Laurentz use the right-of-way across Key's property?

Q: E-Bank, an online financial institution, gives financial information about Paula and other customers to a federal agency without the cus­tomers' permission. E-Bank may be liable under a. the Federal Trade Commission Act. b. the Financial Services Modernization Act. c. the Right to Financial Privacy Act. d. the Uniform Electronic Transactions Act.

Q: Fact Pattern 19-3Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.Refer to Fact Pattern 19-3. When Mike receives his National statement, he demands that the bank investigate the matter and recredit his ac­count. The banka. has no duty to investigate.b. must investigate and, if the dispute is not resolved within ten days, recredit Mike's account (at least until the dispute is resolved).c. must investigate and immediately recredit Mike's account (at least until the dispute is resolved).d. must investigate but need not recredit Mike's account.

Q: Ron signs an instrument using an "R" with a circle around it. With this mark for a signature, the instrument is a. negotiable. b. nonnegotiable, because an initial does not state the signer's name. c. nonnegotiable, because an initial is not a signature. d. nonnegotiable, because a simple initial implies a lack of binding intent.

Q: Hobby Farms, Inc., owns rural property that it leases to various tenants, including Ira. Ira's transfer of his entire interest in the leased property to a Jason is a. an assignment. b. an eviction. c. a right of entry. d. a sublease.

Q: Willy deposits $5,000 with Home State Bank on July 1, 2012. Home State Bank promises to repay Willy the $5,000 plus 3 percent annual interest on July 1, 2017. Home State Bank has issued Willy a a. certificate of deposit. b. cashier's check. c. trade acceptance. d. draft.

Q: Fact Pattern 19-3Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.Refer to Fact Pattern 19-3. Mike is responsible fora. $0.b. $50.c. $500.d. $3,000.

Q: Now Shopping Mall Corporation leases space to Only U Stores and Pik-Ur-Choice, Inc. Later, Pik-Ur-Choice begins to sell items that are similar to Only U's goods, and Only U abandons its space before the end of the lease term. Only U is liable to a. not Now or its other tenants. b. Now and its other tenants, except Pik-Ur-Choice, for any effect on their business. c. Now and its other tenants, including Pik-Ur-Choice, for any effect on their business. d. Now only for the unpaid rent.

Q: If a bank is both the drawer and the drawee with regard to a draft, then the draft is a a. certificate of deposit. b. cashier's check. c. nonnegotiable instrument. d. promissory note.

Q: Bren leases an apartment from Cris for one year. After two months, she sublets the premises for the next six months to Dee, without obtaining Cris's con­sent. Dee pays the rent for only four months. For the last two months of Dee's six-month term, Bren is a. liable for the rent, because Dee defaulted. b. liable for the rent, because the sublease lacked Cris's consent. c. not liable for the rent, because Bren does not own the apartment. d. not liable for the rent, because Bren sublet the premises to Dee.

Q: Dina's debit card, issued by Eminent Bank, is stolen and used without Dina's permission. Dina tells Eminent Bank within thirty days. Dina may be re­quired to pay no more than a. $5. b. $50. c. $500. d. $5,000.

Q: Oak Grove Residences, Inc., owns apartment buildings. Pedro leases one of Oak Grove's apartments. Pedro's transfer of his interest in the lease to Quito for a period shorter than the lease term is a. an assignment. b. an eviction. c. a right of entry. d. a sublease.

Q: Guaranty Bank receives a check drawn on the account of Get-Rich Industries, Inc., one of the bank's customers, at 3 p.m. Friday. Garry, the pre­senter of the check, is not one of the bank's customers. The bank uses de­ferred posting with a 2 p.m. cutoff hour. If it decides to dis­honor the check, it must do so by midnight a. Saturday. b. Sunday. c. Monday. d. Tuesday.

Q: Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is a. a draft. b. an order to accept delivery of money. c. a promise to accept delivery of goods. d. a promise to deliver goods.

Q: Sarah has a checking account at Secure Bank. Sarah buys her roommate Sophie's two tickets to a Broadway musical for $200. Sarah writes Sophie a check for the tickets. In this situation, Secure Bank is the a. drawee. b. indorser. c. payee. d. drawer.

Q: Rita believes that Shady Grove Apartments, Inc., her landlord, has vio­lated the law in a way that entitles her to withhold the rent. This remedy is gener­ally associated with a. breach of the covenant of quiet enjoyment. b. breach of the implied warranty of habitability. c. discrimination. d. failure to provide security against crimes in com­mon areas.

Q: Fact Pattern 19-2Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its ac­count at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.Refer to Fact Pattern 19-2. When Digital's bank received the check, it was required to pass it ona. before midnight of the next banking day.b. before midnight of the next day, even if it was not a "banking" day.c. before noon of the next banking day.d. within five business days.

Q: Xavier owns a duplex that he leases to Yvon and Zack. Xavier may sell a. the duplex at any time. b. the duplex, but only after the lease expires and the tenants move out. c. the duplex, but only with the tenants' permission. d. the lease, but not the duplex.

Q: To obtain a business license, Bess writes a check to a certain state agency. Bess is a. the drawee. b. the drawer. c. the indorser. d. the payee.

Q: Fact Pattern 19-2Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its ac­count at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.Refer to Fact Pattern 19-2. Tom's bank isa. the cashing bank.b. the depositary bank.c. the intermediary bank.d. the payor bank.

Q: Property Management Corporation (PMC) owns several apartment buildings in two states. Regarding standards for maintenance of the build­ings, PMC should consult a. the applicable city ordinances and state statutes. b. the previous owners. c. the long-term tenants. d. the Uniform Landlords' Maintenance Manual.

Q: InterComp normally sells $50,000 worth of software to Power Source, a retail elec­tronics store, each summer on terms requiring payment in sixty days. One year, InterComp wants cash, but Power Source wants the usual sixty days. To meet both needs, the parties can arrange a. a certificate of deposit. b. a bearer bond. c. a trade acceptance. d. an international letter of credit.

Q: On April 1 Richard arranges to buy a sixteen-speed bike from his neighbor Phil for $500. Phil agrees to deliver the bike on May 1. Richard writes a draft for $500 payable to Phil on May 1. In this situation, the draft is a a. certificate of deposit. b. time draft. c. sight draft. d. promissory note.

Q: Fact Pattern 19-2Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its ac­count at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve Bank sends the check to State Bank.Refer to Fact Pattern 19-2. Digital's bank isa. the cashing bank.b. the depositary bank.c. the intermediary bank.d. the payor bank.

Q: Dora leases a house from Evan for a two-year term. To ensure the valid­ity of their lease, it should include a. a description of the premises. b. a due date for the payment of the property taxes. c. a requirement that Dora perform structural repairs to the house. d. a requirement that Evan carry liability insurance.

Q: To obtain office supplies for All-Care Medical Clinic, Britney executes a draft in favor of Chris. A draft is a. a conditional promise to pay money. b. an unconditional written order to pay money. c. a qualified promise to set aside a sum of money. d. a restricted promise to deliver goods at a future date.

Q: On Monday, Eve deposits in her account at Fiscal Bank a local check for $500. After 5:00 p.m. on Friday, from these funds, Eve can withdraw no more than a. $100. b. $400. c. $500. d. $600.

Q: Sid rents an apartment from Town Properties, Inc. The lease, which ends on May 31, does not include an option for re­newal, and Sid and Town do not discuss whether Sid can stay on at the end of the term. On June 1, Sid has a. an implied option to renew the term. b. a right to remain contingent on notice from Town. c. a right to remain subject to notice to Town. d. no right to remain.

Q: Clyde issues a check payable to Discount Mart. Elle, Discount's cashier, forges the store's indorsement and deposits the check in her bank ac­count. Clyde's bank, First State Bank, pays the check. Clyde can recover from a. Elle, but not First State Bank. b. First State Bank, which cannot recover from Elle. c. First State Bank, which can recover from Elle. d. no one.

Q: When there is a breach of an underlying contract for which an instrument was issued, the maker of a note can refuse to pay it.

Q: Kasper, the owner of Lakeview Farm, and Milt, the tenant of the farmhouse on the property, may create a tenancy for years by a. deed. b. express contract. c. implication. d. sufferance.

Q: Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank. Vela forges Tilly's indorsement, First Federal Bank cashes the check, and Vela disappears. United pays First Federal and debits Simon's account. Most likely, the ultimate loss will fall on a. Simon. b. Trudy. c. United Bank. d. First Federal Bank.

Q: Personal defenses are used to avoid payment to an ordinary holder of a negotiable instrument, but not to an HDC or a holder through an HDC.

Q: Rafe signs a one-year lease with Suki to occupy an apartment in Lawrence, Kansas, near the University of Kansas. Rafe needs the apartment only for two semesters and may have to sublet it for the rest of the term. Rafe's tenancy is a. a periodic tenancy. b. a tenancy at will. c. a tenancy at sufferance. d. a tenancy for years.

Q: Elmer can write checks on his account at Finance Bank. Gina steals the checks, forges Elmer's signature, and cashes the checks at Finance. The bank is excused from any liability if, after receipt of the first forged check, Elmer fails to report the forgeries within a. five business days. b. fourteen consecutive days. c. one year. d. three years.

Q: Jamal signs a lease with Kelvin to occupy a house on Leech Lake in Minnesota for the summer. Jamal's tenancy is a. a fixed-term tenancy. b. a periodic tenancy. c. a restrictive covenant. d. a tenancy at will.

Q: Discharge in bankruptcy is no defense on any instrument regardless of the status of the holder.

Q: Rural Holding Company (RHC) possesses farmland. RHC has the right to use the property, including harvesting the crops, for ten years. RHC does not have the right to extract the coal under the land. This is a. a fee simple absolute. b. a leasehold estate. c. a life estate. d. an easement.

Q: An ordinary holder can recover nothing on an instrument that has been materially altered.

Q: Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank. Greta forges Eppie's indorsement. First Federal pays the check. Most likely a. Dru will be liable for the amount. b. Eppie will have to pay Dru for the amount. c. First Federal will have to recredit Dru's account. d. the Federal Reserve will reimburse all parties for their costs.

Q: Consumer Shops, Inc., signs a lease for a storefront owned by Downtown Building Company. Unlike a purchaser of real property, Consumer Shops a. acquires only temporary possession of the premises. b. enjoys exclusive possession of the premises. c. holds only temporary title to the premises. d. retains temporary, exclusive possession and title to the premises.

Q: Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature is a. effective if an innocent third party accepts the check. b. effective to the degree that it matches Caleb's genuine signature. c. effective to the extent that Downtown Bank debits Caleb's account. d. not effective.

Q: Universal defenses are good against all holders except HDCs and holders through HDCs.

Q: To acquire the ownership of a mountain cabin by ad­verse possession, Cody must occupy the cabin exclusively, continuously, and peaceably for a specified period of time a. in an, open, hostile, and adverse manner. b. until the owner files a suit. c. without the owner's knowledge. d. with the state's permission.

Q: Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Uma's account in Verity Bank. Most likely, if the bank pays the check a. the Federal Reserve will reimburse all parties for their costs. b. the loss will be apportioned among all of Verity's customers. c. Uma will be liable for the amount. d. Verity will have to recredit Uma's account.

Q: A person who transfers an instrument for consideration makes certain warranties to the transferee.

Q: Steve steals one of Tricia's checks and forges her signature. Tricia's bank, Unity Bank, pays the check. Tricia can recover from a. Steve, but not Unity Bank. b. Unity Bank, which cannot recover from Steve. c. Unity Bank, which can recover from Steve. d. no one.

Q: Opal conveys three acres of wetlands to Pristine Places, Inc., with a deed that warrants only that Opal held good title during her ownership of the property. This deed is a. a grant deed. b. a quitclaim deed. c. a special warranty deed. d. a warranty deed.

Q: A fictitious payee is a payee on a negotiable instrument whom the maker or drawer does not intend to have an interest in the instrument.

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. thirty days. d. six months.

Q: Elsa, the owner of Fertile Farm, sells Gina a right to camp on Fertile land overnight. Gina's right is a. a leasehold estate. b. a license. c. an easement. d. a profit.

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: Dhani signs a check "pay to the order of Etan" drawn on Dhani's account in First State Bank and dates the check "May 1." Etan presents the check to the bank for payment on December 15. This is a. a dishonored check. b. an overdraft. c. a postdated check. d. a stale check.

Q: With respect to Egor's land, Fig has an easement, Gabe has a profit, and Huck has a license. A right to possess the land is owned by a. Egor, Fig, and Gabe only. b. Egor and Gabe only. c. Egor only. d. Fig, Gabe, and Huck only.

Q: When an instrument has a forged indorsement, the loss usually falls on the party whose indorsement was forged.

Q: Fact Pattern 19-1Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order.Refer to Fact Pattern 19-1. Capital Banka. is liable to Fix-It for the amount of the check.b. must stop payment if Capital has a reasonable time to act.c. need not stop payment unless Echo had a valid reason to act.d. need not follow Echo's order unless the check was certified.

Q: Moby leases from National Theater Corporation a theater in which to stage a series of concerts. Ollie buys a ticket to the series. What distin­guishes Moby, a tenant, from Ollie, a licensee, is a. the exclusivity of possession. b. the quiet enjoyment of rights. c. the temporary nature of possession. d. the title to the property.

Q: Fact Pattern 19-1Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order.Refer to Fact Pattern 19-1. Capital Bank pays the check. Capitala. can sue Echo for a wrongful stop-payment order.b. can sue Fix-It for breach of contract.c. can sue no one because it paid a check that was not properly payable.d. is liable for Echo's loss due to the wrongful payment.

Q: When an instrument is dishonored, only written notice is sufficient to hold secondary parties liable.

Q: Tyro has the right to drive across Ula's land, which is next to Tyro's prop­erty, to reach an access road. Tyro's right is a. an easement appurtenant. b. an easement in gross. c. a profit appurtenant. d. a profit in gross.

Q: Mineral Products Corporation, which owns no land, has a right to mine the copper from Natural Resource Company's land. Mineral's right is a. a leasehold estate. b. a license. c. an easement. d. a profit.

Q: The drawee who signs a draft or check is not primarily liable to any subsequent holders.

Q: Dora writes a check for $100 drawn on Eastern Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Dora may be prosecuted for a. forgery. b. fraud. c. negligence. d. robbery.

Q: Primary liability is unconditional.

Q: Utility Power Company has the right to run its power lines across Velma's land. This is a. a license. b. an easement. c. a profit. d. a tenancy at sufferance.

Q: Dan writes a check to Emma on his account at First State Bank. The bank dishonors the check even though Dan has sufficient funds in his ac­count. The bank is a. liable to Dan only. b. liable to Dan and Emma. c. liable to Emma only. d. not liable to Dan or Emma.

Q: A person cannot become an HDC if a defense against payment is appar­ent on the face of the instrument.

Q: Mix-It Concrete Company has the right to enter Nim's land and remove the rock from Nim's quarry. This is a. a fee simple absolute. b. a license. c. an easement. d. a profit.

Q: A person who acquires an instrument knowing that the instrument contains an unauthorized signature can still be afforded HDC protection.

Q: Region Construction Company has a right to drive its trucks across Staple Business, Inc.'s property, which is adjacent to Region's office. This right is a. a leasehold estate. b. a license. c. an easement. d. a profit.

Q: Liu signs a check "pay to the order of Marv" drawn on Liu's account in National Bank. Liu later orders National not to pay the check, but the bank pays it over Liu's order. Subsequent checks written on Liu's account "bounce." Most likely liable for the costs to Liu is a. any party to whom a subsequent check was written. b. Liu. c. Marv. d. National.

Q: Cow Country Corporation (CCC) sells half of its land to the Double R Ranch. On the land is a reservoir. In the deed, CCC retains the right to remove a lim­ited amount of water per day from the res­ervoir. This right is a. a leasehold estate. b. a license. c. an easement. d. a profit.