If a bank wrongfully pays an item, the bank may be subrogated to the rights that any holder in
due course of the item may have against the drawer of the item
– True
– False
A post dated check is considered a properly payable check and a bank can pay the item
– True
– False
A check that is six months old is no longer properly payable
– True
– False
Wally corp borrows 400k from bank. Wally corp executes a negotiable promissory note to
evidence the loan. Bank insists that two corp. officers also be personally liable on the debt. So
ally, the ceo, signs his name on the back of the note, and Charlene, the cfo, executes a separate
unconditional guaranty. The loan proceeds are used solely for corporate purposes. Which is
true?
– Both ally and Charlene are accommodation parties
– Only Charlene is an accommodation party
– Only ally is an accommodation party
– Neither ally nor Charlene are accommodation parties
Keith was an accommodation party on a note co-signed by his son, hallow, in connection with
hallow’s purchase of a car from dealer. If the dealer sues keith as co-maker, which of the
following responses by keith should cause the dealer the most concern?
– “I don’t owe you a penny because you tampered with the odometer on the car”
– “forget about collecting from me, since hallow had his debt discharged in his recent
bankrupty proceedings”
– “I didn’t receive any consideration from you or hallow for my signature, so I am not
liable on the note”
– “hallow and I had a private understanding that I would not have to pay”
Assume that the dealer has taken action that results in a partial discharge of keith’s liability. The
dealer then negotiated the note to finance company. Finance company then demanded
payment from keith. Which statement is correct?
– Keith’s partial discharge is not effective against the finance company.
– Keith’s partial discharge is effective against the finance company, whether or not the
finance company is a holder in due course
– Keith’s partial discharge is not effective against the finance company if the finance
company is a holder in due course
– Keith’s partial discharge is not effective against the finance company if the finance
company is a holder in due course and did not have notice of the discharge when it
acquired that status
–
None of the above
Eagle property hired falcon contractor to install a small ice rink in one of its buildings. Falcon
hired gull engineering as a subcontractor to perform some of the work. After the rink was
complete, eagle issues a 50k check to falcon. The check was payable to the order of “falcon
contractor and gull engineering.” Falcon obtained payment from the drawee bank without
obtaining gull’s indorsement. How much may the drawee bank charge eagle’s account for the
check?
– 50k
– 25k
– $0
– the amount that eagle promised to pay falcon, minus the amount falcon promised to pay
gulf
According to article 4 of the ucc, “bank” means a financial institution engaged in the business of
banking, including a savings bank, savings and loan association, credit union, or trust company.
– True
– False
Regarding “persons entitled to enforce an instrument” (pete), a person could be a PETE even
though the person is not the owner of the instrument or is in wrongful possession of the
instrument.
– True
– False
According to article 4 of the ucc, a “presenting bank” means a bank presenting an item except a
depository bank.
– True
– False
In a surety arrangement, which of the following contracts are involved?
– The agreement of the underlying obligation between the principal and the creditor
– The agreement of the surety to support the underlying obligation
– The agreement by the principal to reimburse the co-signer
– A & C only
– All of the above
Even if the indorser did not intend it, when an indorser signs a negotiable instrument, the
indorser becomes a surety for the parties who signed the instrument before the indorser.
– True
– False
“issuer” is the name given to a drawer, maker or acceptor of a negotiable instrument.
– True
–
False
Prince wanted to purchase a yacht for 1M, however, the yacht company, Kimberly exotic yachts,
required prince to secure a surety for 500k promissory note to secure a loan to purchase the
yacht. Prince’s biggest fan, duhart, happily decided to co-sign the note. The note had a due date
of January 1, 2017. The note also had a provision in it where duhart consented to any changes
made or could be made between prince and Kimberly exotic yachts of the note. On june 2,
2016, prince realized he would not be able to make payments on the note, and would default
on the jan 1, 2017 due date. Without informing duhart and without getting her consent, prince
contacted Kimberly exotic yachts and re-negotiated the note, and extended the due date to
January 1, 2018. Which of the following statements is true?
– The initial note is not negotiable because it is not unconditional
– The re-negotiated note no longer binds duhart as a surety because she was unaware and
did not give consent to the modification of the original note
– The re-negotiated note is valid and binds duhart as a surety
– None of the above
A maker’s liability on a note is considered to be primary
– True
– False
A drawer’s liability on a draft is considered primary.
– True
– False
Elsa indorsed a note without carefully reading the fine prints in the note which had the
following provision “all parties to this note hereby waive all rights with respect to presentment
and notice of dishonor.” Which of the following statements is true?
– The note is not negotiable
– The note is negotiable
– Elsa is entitled to notice of dishonor of the note
– A & C only
– None of the above
If a drawee bank accepts a draft, it has certified the draft.
– True
– False
The president of nova corp was nova smith. Nova smith is authorized to sign notes on behalf of
nova corp.. However, given his busy schedule, nova smith, without careful review, signed several
promissory notes on behalf of nova corporation. He signed two notes. Note 1: signed only as
“nova smith” and Note 2: signed as Nova corp., “nova smith.” Which of the following is true?
– Nova smith is personally liable on note 1 to a holder in due course
– Nova corp is liable on note 1 to a holder in due course
–
Nova smith is not liable as an agent in note 1 to a holder in due course
Both B & C are correct
Both A & B are correct
Regarding nova corp’s and nova smith’s liability as to note 2, which of the is/are correct?
– Under the ucc, parol evidence may not be admitted to determine whether nova smith
was authorized to sign on behalf of nova corp.
– Under the ucc, parol evidence may not be admitted to determine whether nova smith
intended to sign on behalf of nova corp
– Nova smith is liable as an agent to a holder in due course
– All of the above
– None of the above
