Question 1

For a change to constitute an alteration,the person making the change must be a party to the instrument.

Accepted Answer

A) True 
 B)False

Question 2

Ordinarily the maker's lack of capacity may be raised as a defense against a holder in due course.

Accepted Answer

A) True 
 B)False

Question 3

In 1976 the Federal Trade Commission adopted a rule that expands the rights of a holder in due course in a consumer credit transaction.

Accepted Answer

A) True 
 B)False

Question 4

The fact that a person signs a negotiable instrument because he or she is fraudulently deceived regarding its nature or essential terms is a defense available against all holders.

Accepted Answer

A) True 
 B)False

Question 5

A holder is a party in possession of an instrument that "runs" to him.An instrument runs to a party if it is:

Accepted Answer

A)   payable to his or her order.
B)   bearer paper.
C)   indorsed to him or her.
D)   all of the above.E) A) and B)
F) None of the above

Question 6

The law gives certain holders of a negotiable instrument a preferred standing by protecting them from all defenses when they sue to collect payment.

Accepted Answer

A) True 
 B)False

Question 7

Isidro issued a negotiable promissory note to his attorney in return for the attorney's promise to perform legal services.The attorney never rendered the legal services but quickly negotiated the note to Anna,a holder in due course.Anna and Mark were involved in business negotiations and Anna offered to purchase a car from Mark.She offered as part payment for the car the note issued by Isidro.By coincidence,Mark knew both Isidro and the attorney and the facts concerning the note and the unperformed legal services.Despite this,Mark accepted a negotiation of the note from Anna.Isidro refused to pay the note and Mark eventually sued Isidro to collect.What is the probable outcome?

Accepted Answer

Mark knew of the defense of the maker,Is...

Question 8

A holder through a holder in due course:

Accepted Answer

A)   has greater rights than a holder in due course.
B)   has fewer rights than a holder in due course.
C)   has the same rights as a holder in due course.
D)   must meet the requirements for becoming a holder in due course in order to achieve holder in due course status.E) A) and B)
F) B) and D)

Question 9

Generally defenses that could be raised in a breach of contact claim cannot be raised against a holder in due course.

Accepted Answer

A) True 
 B)False

Question 10

A(n) __________ is an unauthorized change or completion of a negotiable instrument designed to modify the obligation of a party to the instrument.

Accepted Answer

A)   alteration
B)   modification
C)   transformation
D)   transmutationE) A) and B)
F) A) and C)

Question 11

Economic duress,in the form of a reluctance to enter into a financially demanding instrument,is a universal defense.

Accepted Answer

A) True 
 B)False

Question 12

The FTC rule,which provides that a notice provision must be included in all consumer credit contracts,requires that the notice:

Accepted Answer

A)   limit recovery under the contract to amounts paid by the debtor plus a reasonable charge for incidental damages.
B)   be in italic type.
C)   be at least 20 points in size.
D)   has the effect that no subsequent person can be a holder in due course of the instrument.E) B) and C)
F) A) and C)

Question 13

A taker of a negotiable instrument may be denied the status and protection of a holder in due course where:

Accepted Answer

A)   one party is a consumer.
B)   the close-connection doctrine applies.
C)   the instrument is bearer paper.
D)   none of the above.E) A) and B)
F) B) and C)

Question 14

Value is similar to consideration..

Accepted Answer

A) True 
 B)False

Question 15

A holder having the rights of a holder in due course is subject to the defense of fraud in the inducement.

Accepted Answer

A) True 
 B)False

Question 16

Illegality,such as a note for gambling,is a universal defense.

Accepted Answer

A) True 
 B)False

Question 17

A holder through a holder in due course is subject to limited defenses.

Accepted Answer

A) True 
 B)False

Question 18

Bad faith sometimes exists just because a transferee takes an instrument under odd circumstances.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following will not be considered value in connection with determining holder in due course status?

Accepted Answer

A)   performing the act for which the instrument was given
B)   promising to perform an existing legal obligation
C)   receiving the instrument as security for a loan
D)   taking the instrument in payment of a debtE) B) and C)
F) C) and D)

Question 20

Fraud in factum:

Accepted Answer

A)   occurs when a person is persuaded to execute an instrument because of fraudulent statements.
B)   occurs when a person signs an instrument as a result of being fraudulently deceived regarding essential terms.
C)   is not a universal defense.
D)   cannot be raised against a holder in due course.E) All of the above
F) C) and D)

Exam 30: Liability of the Parties Under Negotiable Instruments

The fact that a person signs a negotiable instrument because he or she is fraudulently deceived regarding its nature or essential terms is a defense available against all holders.

Correct Answer
verified

For a change to constitute an alteration,the person making the change must be a party to the instrument.

Correct Answer
verified

A holder is a party in possession of an instrument that "runs" to him.An instrument runs to a party if it is:

Correct Answer
verified

A taker of a negotiable instrument may be denied the status and protection of a holder in due course where:

Correct Answer
verified

The law gives certain holders of a negotiable instrument a preferred standing by protecting them from all defenses when they sue to collect payment.

Correct Answer
verified

A holder through a holder in due course:

Correct Answer
verified

Which of the following will not be considered value in connection with determining holder in due course status?

Correct Answer
verified

In 1976 the Federal Trade Commission adopted a rule that expands the rights of a holder in due course in a consumer credit transaction.

Correct Answer
verified

The FTC rule,which provides that a notice provision must be included in all consumer credit contracts,requires that the notice:

Correct Answer
verified

Value is similar to consideration..

Correct Answer
verified

A holder having the rights of a holder in due course is subject to the defense of fraud in the inducement.

Correct Answer
verified

Economic duress,in the form of a reluctance to enter into a financially demanding instrument,is a universal defense.

Correct Answer
verified

A holder through a holder in due course is subject to limited defenses.

Correct Answer
verified

Correct Answer
verified
Mark knew of the defense of the maker,Is...
View Answer

Generally defenses that could be raised in a breach of contact claim cannot be raised against a holder in due course.

Correct Answer
verified

Ordinarily the maker's lack of capacity may be raised as a defense against a holder in due course.

Correct Answer
verified

Bad faith sometimes exists just because a transferee takes an instrument under odd circumstances.

Correct Answer
verified

Illegality,such as a note for gambling,is a universal defense.

Correct Answer
verified

Fraud in factum:

Correct Answer
verified

A(n) __________ is an unauthorized change or completion of a negotiable instrument designed to modify the obligation of a party to the instrument.

Correct Answer
verified

Exam 30: Liability of the Parties Under Negotiable Instruments

The fact that a person signs a negotiable instrument because he or she is fraudulently deceived regarding its nature or essential terms is a defense available against all holders.

Correct AnswerverifiedShow Answer

For a change to constitute an alteration,the person making the change must be a party to the instrument.

Correct AnswerverifiedShow Answer

A holder is a party in possession of an instrument that "runs" to him.An instrument runs to a party if it is:

Correct AnswerverifiedShow Answer

A taker of a negotiable instrument may be denied the status and protection of a holder in due course where:

Correct AnswerverifiedShow Answer

The law gives certain holders of a negotiable instrument a preferred standing by protecting them from all defenses when they sue to collect payment.

Correct AnswerverifiedShow Answer

A holder through a holder in due course:

Correct AnswerverifiedShow Answer

Which of the following will not be considered value in connection with determining holder in due course status?

Correct AnswerverifiedShow Answer

In 1976 the Federal Trade Commission adopted a rule that expands the rights of a holder in due course in a consumer credit transaction.

Correct AnswerverifiedShow Answer

The FTC rule,which provides that a notice provision must be included in all consumer credit contracts,requires that the notice:

Correct AnswerverifiedShow Answer

Value is similar to consideration..

Correct AnswerverifiedShow Answer

A holder having the rights of a holder in due course is subject to the defense of fraud in the inducement.

Correct AnswerverifiedShow Answer

Economic duress,in the form of a reluctance to enter into a financially demanding instrument,is a universal defense.

Correct AnswerverifiedShow Answer

A holder through a holder in due course is subject to limited defenses.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedMark knew of the defense of the maker,Is...View AnswerShow Answer

Generally defenses that could be raised in a breach of contact claim cannot be raised against a holder in due course.

Correct AnswerverifiedShow Answer

Ordinarily the maker's lack of capacity may be raised as a defense against a holder in due course.

Correct AnswerverifiedShow Answer

Bad faith sometimes exists just because a transferee takes an instrument under odd circumstances.

Correct AnswerverifiedShow Answer

Illegality,such as a note for gambling,is a universal defense.

Correct AnswerverifiedShow Answer

Fraud in factum:

Correct AnswerverifiedShow Answer

A(n) __________ is an unauthorized change or completion of a negotiable instrument designed to modify the obligation of a party to the instrument.

Correct AnswerverifiedShow Answer

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Mark knew of the defense of the maker,Is...
View Answer

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