Question 1

"Run Around." Millie issues a promissory note to Bob. Bob endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Henry. Henry presents the note to Millie for payment. When Henry presents the note to Millie, she asks him for reasonable identification. He did not have any identification with him and told her that she had no right to dishonor the instrument. Millie continued to insist, so finally, on the same day, Bob obtained clear identification and presented it to her. Nevertheless, even with proper identification, Millie refused to pay the note, claiming that she lacked the funds with which to do so. After properly providing notification of dishonor to both Anne and Bob, Henry requested that Anne pay the note, but she told him that he would have to get his money from Bob. Henry has been trying to call Bob for 35 days, but Bob did not return his telephone calls. Henry is exasperated; and within 40 days of when Millie refuses payment, he notifies Millie, Bob, and Anne that the promissory note has been dishonored by Millie and that he is asserting liability on the note against all of them. Millie calls him up and says that she never dishonored the note, she simply lacks the funds with which to immediately pay and thinks that he should seek recovery elsewhere.

-Which of the following is true regarding Anne's statement to Henry that he must seek recovery from Bob?

Accepted Answer

A)   Anne is correct.
B)   Anne is correct only if Bob is able to pay and has not filed bankruptcy.
C)   Anne is correct in stating that Henry should seek recovery from Bob only if Millie has filed bankruptcy because, otherwise, Henry should be pursuing litigation against Millie.
D)   Anne is correct unless the note is for over $10,000, in which case Henry can seek recovery from her without resorting to recovery from Bob or Millie.
E)   Anne is incorrect. Henry may seek recovery from her without first seeking recovery from Bob.F) A) and D)
G) B) and C)

Question 2

Set forth the five items that a party warrants when the party transfers an instrument for consideration.

Accepted Answer

When a party transfers an instrument for...

Question 3

Violet has authority to act on behalf of and bind Robert. Which of the following legal term describes Robert's position?

Accepted Answer

A)   Agent
B)   Principal
C)   Warrantor
D)   Transferor
E)   Real endorserF) B) and D)
G) A) and B)

Question 4

Which of the following is true regarding what is considered a commercially reasonable manner by which notice of dishonor may be given to a secondarily liable party?

Accepted Answer

A)   The only commercially reasonable manner for notice of dishonor recognized by the UCC is certified mail.
B)   The UCC recognizes two manners of delivery for notice of dishonor that are considered commercially reasonable: written and electronic.
C)   The only commercially reasonable manner recognized by the UCC for notice of dishonor is written mail.
D)   Due to advances in technology, the only commercially reasonable manner recognized by the UCC for notice of dishonor is electronic communication.
E)   The UCC recognizes that oral, written, and electronic communications are all commercially reasonable ways in which to provide notice of dishonor.F) B) and C)
G) B) and E)

Question 5

Which of the following is false regarding means by which an instrument may be cancelled by a person entitled to enforce it?

Accepted Answer

A)   Consideration is necessary before a cancellation, a form of contractual agreement, is effective.
B)   A party may cancel an instrument by simply writing "paid" on the instrument.
C)   A party may cancel an instrument by intentionally destroying the instrument.
D)   A party may cancel an instrument by intentionally mutilating the instrument.
E)   A party may cancel an instrument by giving the instrument to the obliged party.F) B) and D)
G) A) and B)

Question 6

If an accommodated party pays a note when it is due, the accommodated party can force any accommodation party to contribute based upon the number of accommodation parties that exist.

Accepted Answer

A) True 
 B)False

Question 7

"Banking Problems." Constance is a loan officer at ABC Bank. Being somewhat dishonest, Constance tells Henry, a customer of the bank, who is wealthy and rarely checks the status of outstanding loans and balances that she is collecting money for a local animal shelter. She asks him to sign a pledge that he will contribute $50 to the animal shelter. In fact, through covering pertinent terms of the document, she had him sign a promissory note made out to her for $5,000, which she later endorsed to Richard. After leaving the bank, Henry proceeded to one of his businesses, a used car dealership. Taylor comes in to purchase a used car. He and Henry agree that Taylor will purchase a car for $3,000. Martha also comes in, and she and Henry agree that she will purchase a used car for $4,000. Both Taylor and Martha make out promissory notes payable to Henry. At the end of the day, Henry is looking through the notes and decides that Taylor's was mistakenly made out for $3,000 when it should have been $3,500. Henry mistakenly, but honestly, believes that the deal was for $3,500. Therefore, he changes the note to reflect that Taylor owes $3,500. Henry, on the other hand, simply does not like Martha. He decides that $4,000 was not enough for the car. Accordingly, he changes the note to $4,500.
-Which of the following is true regarding Martha's liability to Henry?

Accepted Answer

A)   Because of the fraudulent alteration, Martha is not liable to Henry for any amounts under the promissory note.
B)   Martha's obligation will be enforced only to the amount of $4,000 if payment is to be made to Henry; but if the note has been negotiated to another holder, Martha is liable for $4,500.
C)   Taylor's obligation will be enforced only to the amount of $3,000 if payment is to be made to Henry; but in the event the note is negotiated to a holder in due course, Taylor is liable for $3,500.
D)   Unless Martha has a written document from Henry to the effect that the agreement was for $4,000 only, Martha and Henry will be legally required to split the remainder with Martha being held responsible for $4,250.
E)   Martha is liable for $4,000 regardless of whether or not Henry has negotiated the note to another party.F) All of the above
G) B) and D)

Exam 28: Liability, Defenses, and Discharge

Correct Answer
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Set forth the five items that a party warrants when the party transfers an instrument for consideration.

Correct Answer
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When a party transfers an instrument for...
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Which of the following is false regarding means by which an instrument may be cancelled by a person entitled to enforce it?

Correct Answer
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If an accommodated party pays a note when it is due, the accommodated party can force any accommodation party to contribute based upon the number of accommodation parties that exist.

Correct Answer
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Violet has authority to act on behalf of and bind Robert. Which of the following legal term describes Robert's position?

Correct Answer
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Which of the following is true regarding what is considered a commercially reasonable manner by which notice of dishonor may be given to a secondarily liable party?

Correct Answer
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Correct Answer
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Exam 28: Liability, Defenses, and Discharge

Correct AnswerverifiedShow Answer

Set forth the five items that a party warrants when the party transfers an instrument for consideration.

Correct AnswerverifiedWhen a party transfers an instrument for...View AnswerShow Answer

Which of the following is false regarding means by which an instrument may be cancelled by a person entitled to enforce it?

Correct AnswerverifiedShow Answer

If an accommodated party pays a note when it is due, the accommodated party can force any accommodation party to contribute based upon the number of accommodation parties that exist.

Correct AnswerverifiedShow Answer

Violet has authority to act on behalf of and bind Robert. Which of the following legal term describes Robert's position?

Correct AnswerverifiedShow Answer

Which of the following is true regarding what is considered a commercially reasonable manner by which notice of dishonor may be given to a secondarily liable party?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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When a party transfers an instrument for...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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