Question 1

Under the Shelter Principle:

Accepted Answer

A)   A holder may acquire the rights and privileges of an HDC even if the instrument is not transferred directly from an HDC.
B)   A holder may not acquire the rights of an HDC unless the instrument is transferred directly from an HDC.
C)   A holder who engages in fraud still may become an HDC if he or she later obtains the instrument from an HDC.
D)   The transferee does not acquire all the rights the transferor had in the item.
E)   The holder may not acquire the rights of an HDC if the instrument has been previously dishonored.F) A) and C)
G) B) and C)

Question 2

A(n)  ________ endorsement is the endorser's signature along with a named endorsee.

Accepted Answer

A)   Blank
B)   Allonge
C)   Qualified
D)   Special
E)   SpecificF) A) and B)
G) B) and E)

Question 3

Negotiability can be destroyed by a conditional endorsement.

Accepted Answer

A) True 
 B)False

Question 4

The requirement that a holder in due course must take an instrument for value can be satisfied by receiving an instrument as a gift.

Accepted Answer

A) True 
 B)False

Question 5

A person who engages in fraud may not obtain the rights of an HDC.

Accepted Answer

A) True 
 B)False

Question 6

The ________ is a concept that if an item is transferred from one person to another, the transferee acquires all the rights the transferor had in the item.

Accepted Answer

A)   principle shelter rule
B)   shelter principle
C)   transferee/transferor principle
D)   transferor rule
E)   holder in due course ruleF) All of the above
G) D) and E)

Question 7

[Check Issues] Kelsey owns and operates a currency exchange. A regular customer, Rafe, comes in and cashes a $2,000 check issued by ABC Trucking. The day after Kelsey cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the checks she cashed for Rafe had been stolen. At the time she took the check, Kelsey was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Kelsey decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took Rafe's check, she took a check from another customer, Brett. It was later discovered that the check, which was four months old, was the subject of a dispute between Brett and the issuer of the check for whom Brett had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Brett had stopped payment on the checks. Kelsey claimed that as a holder in due course, she was entitled to payment on both checks.
-What is the effect of the check's alteration on Kelsey's status as a holder in due course?

Accepted Answer

A)   The alteration has no effect because a holder is not charged with examining an instrument presented for payment.
B)   The alteration will likely prohibit her from being a holder in due course.
C)   The alteration will affect her status as a holder in due course only if she had been put on notice of prior criminal behavior in the past on the part of Rafe.
D)   The alteration will affect her status as a holder in due course only if the issuer can establish that it was not negligent in allowing a thief to gain access resulting in the alteration.
E)   On the basis that the law does not want to unduly burden holders, the alteration will affect her status as a holder in due course only because the instrument was written for an amount in excess of $500.F) A) and E)
G) C) and D)

Question 8

An instrument that reads, "Pay to the order of Jones and Green," establishes ________ payees.

Accepted Answer

A)   Joint
B)   Concurrent
C)   Consecutive
D)   Alternative
E)   AlternateF) A) and C)
G) A) and E)

Question 9

Which of the following was the result in Michael J. Kane, Jr. v. Grace Kroll, the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son, but later stopped payment on the check because her son said he could not repay her?

Accepted Answer

A)   The plaintiff was not allowed to recover because the stop payment order prevented the plaintiff from being a holder in due course.
B)   The plaintiff was not allowed to recover because, although he was a holder in due course, the stop payment order negated his entitlement to payment.
C)   The plaintiff was not allowed to recover because the defendant established a lack of consideration to her.
D)   The plaintiff was allowed to recover on a contract theory although he was not a holder in due course.
E)   The plaintiff was allowed to recover because he was a holder in due course.F) A) and E)
G) B) and C)

Question 10

A party who receives a negotiable instrument as a(n)  ________ or through mistake will be a holder instead of a holder in due course.

Accepted Answer

A)   gift
B)   value instrument
C)   endorsed instrument
D)   defective instrument
E)   bearer instrumentF) A) and E)
G) D) and E)

Exam 27: Negotiation, Holder in Due Course, and Defenses

A person who engages in fraud may not obtain the rights of an HDC.

Correct Answer
verified

A(n) ________ endorsement is the endorser's signature along with a named endorsee.

Correct Answer
verified

Negotiability can be destroyed by a conditional endorsement.

Correct Answer
verified

The ________ is a concept that if an item is transferred from one person to another, the transferee acquires all the rights the transferor had in the item.

Correct Answer
verified

An instrument that reads, "Pay to the order of Jones and Green," establishes ________ payees.

Correct Answer
verified

Correct Answer
verified

Which of the following was the result in Michael J. Kane, Jr. v. Grace Kroll, the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son, but later stopped payment on the check because her son said he could not repay her?

Correct Answer
verified

Under the Shelter Principle:

Correct Answer
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A party who receives a negotiable instrument as a(n) ________ or through mistake will be a holder instead of a holder in due course.

Correct Answer
verified

The requirement that a holder in due course must take an instrument for value can be satisfied by receiving an instrument as a gift.

Correct Answer
verified

Exam 27: Negotiation, Holder in Due Course, and Defenses

A person who engages in fraud may not obtain the rights of an HDC.

Correct AnswerverifiedShow Answer

A(n) ________ endorsement is the endorser's signature along with a named endorsee.

Correct AnswerverifiedShow Answer

Negotiability can be destroyed by a conditional endorsement.

Correct AnswerverifiedShow Answer

The ________ is a concept that if an item is transferred from one person to another, the transferee acquires all the rights the transferor had in the item.

Correct AnswerverifiedShow Answer

An instrument that reads, "Pay to the order of Jones and Green," establishes ________ payees.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following was the result in Michael J. Kane, Jr. v. Grace Kroll, the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son, but later stopped payment on the check because her son said he could not repay her?

Correct AnswerverifiedShow Answer

Under the Shelter Principle:

Correct AnswerverifiedShow Answer

A party who receives a negotiable instrument as a(n) ________ or through mistake will be a holder instead of a holder in due course.

Correct AnswerverifiedShow Answer

The requirement that a holder in due course must take an instrument for value can be satisfied by receiving an instrument as a gift.

Correct AnswerverifiedShow Answer

Correct Answer
verified

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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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