Find the effect of the presence of a defense

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Reference no: EM1312612

Multiple choice questions related to basic

1.Which of the following parties are liable only after a negotiable instrument has been presented and dishonored, and proper notice has been given?
a.Drawer, maker, acceptor, and qualified indorser.
b.Maker, acceptor, and unqualified indorser.
c.Acceptor and qualified indorser.
d.Drawer and unqualified indorser.
e.Maker and unqualified indorser.

2. What is the effect of the presence of a defense in connection with a negotiable instrument?
a.Payment of the instrument can be avoided.
b.The instrument becomes null and void.
c.The transfer warranties are no longer applicable.
d.The maker or drawer becomes liable for damages.

3. Which of the following will not discharge a party from liability on a negotiable instrument?
a.Payment by the party who is primarily liable.
b.Cancellation of the instrument.
c.A subsequent holder releasing collateral securing the instrument.
d.Failing to comply with a restrictive indorsement.

4. Who is discharged if a holder strikes out a prior indorsement on a negotiable instrument?
a.Only the party whose name was stricken.
b.The party whose name was stricken and all prior indorsers.
c.The party whose name was stricken and all subsequent indorsers.
d.All indorsers.

5.Lisa purchases a home theater system from Homeplace Cinema. Lisa signs a $10,000 negotiable promissory note in connection with this purchase. This note requires monthly payments for 5 years. After the system is installed, Lisa begins to have trouble with it. It turns out that there are defective components in both the video and audio aspects of the system. Meanwhile, Homeplace Cinema has sold Lisa's promissory note to Amalgamated Finance, which meets all the requirements of a holder in due course. Lisa refuses to make any further payments on the notes due to the breach of contract by Homeplace Cinema. Which of the following is true?
a.Lisa has no further obligation to pay because the breach of contract is a real defense.
b.Lisa must pay the note to the extent of the fair market value of the home theater system in its current condition.
c.Lisa does not have to pay because federal legislation has eliminated holder in due course protection for negotiable instruments that are part of a consumer credit transaction.
d.Lisa must pay because the obligation of a promissory note is always unconditional.

6. A holder of a negotiable instrument is:
a.Anyone who has possession of an instrument.
b.Anyone who is rightfully in possession of an instrument.
c.Anyone who is in possession of a bearer instrument or anyone who is in possession of an instrument payable to that person.
d.Anyone who is in possession of an instrument payable to that person.
e.Anyone who is in possession of an instrument payable to that person if the person has indorsed the instrument.

7. Which of the following is correct with regard to a holder in due course?
a.A holder in due course is primarily liable on an instrument.
b.A holder in due course must notify subsequent transferees of his holder in due course status.
c.A holder in due course can obtain greater rights to payment of an instrument than his transferor had.
d.A holder in due course can give greater rights to a transferee than he has as a holder in due course.

8. The advantage of a holder in due course over a simple holder of an instrument is that the holder in due course can:
a.Indorse the instrument "without recourse," thus limiting his liability.
b.Transfer the instrument to others, thus using it as a substitute for money.
c.Collect on the instrument even if it has been forged.
d.Collect on the instrument if the maker or drawer asserts a personal defense.
e.Collect punitive damages from a party who wrongly does not pay a negotiable instrument.

Reference no: EM1312612

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