Business Law II

 

 

True/False
Indicate whether the statement is true or false.

____ 1. An instrument “payable to bearer” is transferable by assignment or by negotiation.

____ 2. An order instrument is negotiated by delivery alone.

____ 3. The party that holds an instrument “payable to bearer” is entitled to present the instrument for payment or to transfer it to another party.

____ 4. A person who receives an instrument as a gift normally possesses the rights of an HDC.

____ 5. Good faith, for purposes of UCC Article 3, is “honesty in fact and the observance of reasonable commercial standards of fair dealing.”

____ 6. A negotiable instrument serves as a substitute for cash.

____ 7. A promissory note cannot be a negotiable instrument.

____ 8. A notation on an instrument that it is “negotiable” is sufficient to render it negotiable.

____ 9. For an instrument to be negotiable, it must be in writing.

____ 10. Rubber stamp signatures can be legally binding signatures.

Multiple Choice
Identify the choice that best completes the statement or answers the question.

____ 11. Bill transfers an instrument to Harry by assigning his rights in the instrument to Harry. This transfer is governed by
a. administrative law.
b. contract law.
c. municipal ordinances.
d. the UCC.
____ 12. Dina signs a check payable to Evan, who indorses the back, gives it to First State Bank, and receives cash. The transfer of the check from Evan to the bank is
a. an assignment and a negotiation.
b. an assignment only.
c. a negotiation only.
d. neither an assignment nor a negotiation.
____ 13. Ida signs a check payable to Jane and gives it to her. She indorses the back, and transfers the check to Kyle. To negotiate the check to Leo, Kyle must
a. indorse “Kyle” on the back and deliver the check to Leo.
b. indorse “pay to the order of Leo [signed] Kyle” on the back and deliver the check to Leo.
c. only deliver the check to Leo.
d. transfer the check through the drawee bank.
____ 14. Alan transfers an instrument to Beth by negotiation. On negotiation, Beth becomes
a. a holder.
b. an assignee.
c. a negotiator.
d. an instrumentation.
____ 15. Mike receives a payroll check from National Computer Systems, Inc., and indorses it by signing his name on the back of the check. This is
a. a blank indorsement.
b. a qualified indorsement.
c. a restrictive indorsement.
d. a special indorsement.
____ 16. Gina writes and signs a check payable to “Happy Market.” Irma, Happy’s manager, indorses the check “For deposit only.” This is
a. a blank indorsement.
b. a qualified indorsement.
c. a restrictive indorsement.
d. a special indorsement.
____ 17. 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.
____ 18. 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.
____ 19. Dave writes a check for $100 payable to Eve on his account at First State Bank. The bank is
a. the bearer.
b. thedrawee.
c. the drawer.
d. the holder.
____ 20. Dick buys a computer by executing a promissory note in favor of Excel Computers, Inc., is secured by Dick’s stock in Fine Oil Company. The note is
a. a certificate of deposit.
b. a collateral note.
c. an installment note.
d. a stock certificate.
Fact Pattern 24-1
Eagle Corporation borrows $10 million from First Bank to build Grande Suites, an office complex. Eagle guarantees the payment of the loan with its “notes.” Eagle owns a certificate of deposit (CD) for $1 million, which is promised to pay Grande Suites’ employee medical claims. Before the loan is paid, Eagle files for bankruptcy, and the CD is returned. First Bank asks the court for the CD.

____ 21. Refer to Fact Pattern 24-1. Suppose that the loan guaranty is limited to “negotiable instruments that relate to a business now or later conducted on the land.” In this circumstance, under the reasoning in Case 24.2, In re Premier Interval Resorts, Inc., the court will most likely award the CD to
a. Eagle because Eagle has filed for bankruptcy.
b. Eagle because the CD relates to medical claims, not “the land.”
c. First Bank because the CD relates to Grande Suites, which is a business “on the land.”
d. First Bank because the loan is not yet paid.
____ 22. Refer to Fact Pattern 24-1. Under the decision in Case 24.2, In re Premier Interval Resorts, Inc., the court will most likely award the CD to
a. Eagle because Grande Suites’ employees may have medical claims.
b. Eagle because under UCC Article 3, a CD is not a note.
c. First Bank because the loan is not yet paid.
d. First Bank because UCC Article 3 treats a CD as a note.
____ 23. Finest Business Company issues an instrument in favor of General Supplies, Inc. For the instrument to be negotiable, it need not
a. be an unconditional promise or order to pay.
b. be payable on demand or at a specific time.
c. be signed by Diner’s Restaurant.
d. recite the consideration given in exchange for a promise to pay.
____ 24. Rita owes $6,000 in unpaid taxes. In the sand of Seaside Beach, she executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely
a. negotiable.
b. nonnegotiable, because an instrument must be on paper.
c. nonnegotiable, because sand is not sufficiently permanent.
d. nonnegotiable, because the government does not appreciate it.
____ 25. 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.