Problem 1. The B Bank loans Joe Smith some money. Joe signs a promissory note obligating him to pay the money back at 8% interest. The note is a standard form prepared by the bank. For this reason, the bank is the maker of this note.
Problem 2. A check payable to the order of cash is an example of bearer paper.
Problem 3. Ed pays for a gambling debt in State X using a check made payable to Tony Soprano, to whom he owes the debt. State X has a statute that makes any instrument in payment of a gambling debt void. The effect of this statute is:
A) The instrument is still negotiable,
B) The instrument is void.
C) The instrument is voidable.
D) Both A and B.
Problem 4. Which of the following is a promise to pay money rather than an order to pay money?
A) A certificate of deposit.
B) A draft.
C) A check.
D) All of the above are promises to pay money.
Problem 5. The drawer of a negotiable instrument:
A) Promises to pay a fixed sum of money on demand.
B) Is the party (usually a bank or another financial institution) who drafts a note.
C) Includes a checking account customer who writes a check on his account.
D) Is the party who receives payment on a note.
Problem 6. A check that is payable "to Jay Zucker" is negotiated by Jay writing his name on the back of the check and giving it to the person to whom he wants to transfer it.
Problem 7. The new Article 3 recognizes and enforces indorsements that prohibit further negotiation of the instrument.
Problem 8. Mel threatens that he will get Kim fired from her job if she does not sign a check made payable to Bob for $1,000. Bob witnesses Mel's threats. Bob is still a holder in due course.
Problem 9: The new Article 3 refuses to recognize or enforce:
A) Indorsements for deposit.
B) Conditional indorsements.
C) Indorsements directing the indorsee to act for someone else's benefit.
D) Indorsements for collection.
Problem 10. In which of the following situations has the holder of a negotiable instrument not given value for it?
A) Where the holder takes the instrument as security for a preexisting claim.
B) Where the holder gives a negotiable instrument in return for the one received.
C) Where the holder receives the instrument as a gift.
D) Where the holder acquires a security interest in the instrument.
Problem 11. A bank that certifies a check becomes primarily liable on that check.
Problem 12. One who presents a negotiable instrument for payment warrants to the party making payment that the instrument has not been altered.
Problem 13: Discharge of a negotiable instrument by cancellation of the instrument requires a writing stating that the instrument is being cancelled.
Problem 14: Potter owes George $500.00. Potter writes a check payable to George for that amount. Later, George lost the check. Potter is now discharged from his liability on the check.
Problem 15. Maya Efrat, Chief Financial Officer for BAZ Inc., is authorized to sign checks for BAZ Inc. She signs a check "BAZ Inc. by Efrat, Chief Financial Officer." Which of the following statements is most accurate?
A) Maya and not BAZ Inc. is liable on the check.
B) BAZ Inc. and not Maya is liable on the check.
C) Both BAZ Inc. and Maya are liable on the check.
D) Neither BAZ Inc. nor Maya are liable on the check.
Problem 16. A bank may pay a post-dated check before the date on the check and charge the amount to the customer's account, unless the customer has given notice to the bank.
Problem 17: An oral stop-payment order normally is good for 14 days.
Problem 18. The Electronic Funds Transfer Act governs "check conversion" transactions.
Problem 19. A drawer whose bank paid checks over a stop-payment order may not be entitled to have his account recredited if he is unable to show he suffered any loss.
Problem 20. A written stop-payment order is good for:
A) 14 days, with a 14-day extension.
B) 14 days, with a six-month extension.
C) Six months, with a 14-day extension.
D) Six months, with a six-month extension.