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

A) The court ruled that because the defending bank was merely the depositary bank, it held no responsibility to the plaintiff.
B) The court ruled that because employee fraud was involved, the defending bank held no responsibility to the plaintiff.
C) The court ruled that because a fraud was involved, regardless of whether or not it was on the part of plaintiff's employee, the defending bank held no responsibility to the plaintiff.
D) The court ruled that the defending bank was liable to the plaintiff for checks bearing the endorsement "for deposit only," but not for the checks with no endorsement because as to those checks, the bank was entitled to assume that the depositor was entitled to deposit the checks.
E) The court ruled that plaintiff was entitled to recover from the bank for all the checks.

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A) It has no effect on any subsequent holder.
B) It has no effect on anyone, including, but not limited to, any subsequent holder.
C) It means that Bill Brown does not provide any guarantees and that if the instrument is later dishonored, he cannot be held liable.
D) It means that Bill Brown is providing that any subsequent holder cannot be held liable.
E) Bill Brown is providing that neither he nor the person who transferred the instrument to him cannot be held further liable to any subsequent holder.

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A) The UCC provides that the only method by which a holder may take an instrument for value but not become a holder in due course is when the holder purchases the instrument at judicial sale or under legal process.
B) The UCC provides that the only method by which a holder may take an instrument for value, but not become a holder in due course is when the holder acquires an instrument through taking over an estate.
C) The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following two circumstances: (1) when the holder purchases the instrument at judicial sale or under legal process, and (2) when the holder acquires an instrument through taking over an estate.
D) The UCC provides that a holder may take an instrument for value, but not become a holder in due course under the following three circumstances: (1) when the holder purchases the instrument at judicial sale or under legal process, (2) when the holder acquires an instrument through taking over an estate, and (3) when the holder purchases the instrument as part of a bulk transaction not in the regular course of business of the transferor.
E) The UCC does not recognize circumstances under which a holder may take an instrument for value but not become a holder in due course, although under common law, a person who acquired an instrument through taking over an estate was classified as a holder but not a holder in due course.

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A) He is not a holder in due course because he did not provide value.
B) He is not a holder because he did not provide value.
C) He is not a holder nor is he a holder in due course because he did not provide value.
D) The fact that a gift was involved does not prevent Sam from being a holder in due course so long as other requirements are satisfied.
E) The fact that a gift was involved does not prevent Sam from being a holder in due course so long as other requirements are satisfied and Sam is not a minor.

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A) Under the UCC a person has notice of a fact only when the person has actual knowledge of the fact.
B) Under the UCC a person has notice of a fact under the following two circumstances: (1) when the person has actual knowledge of the fact, and (2) when the person receives notice or notification of the facts.
C) Under the UCC a person has notice of a fact under the following three circumstances: (1) when the person has actual knowledge of the fact, (2) when the person receives notice or notification of the facts, and (3) when the person has reason to know the fact exists.
D) Under the UCC a person has notice of a fact only when the person has signed a verification to the effect that notice was received.
E) Under the UCC a person has notice of a fact only when the person receives written notification either through regular mail or electronic means.

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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.

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In order to be considered a holder in du...

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A) Allonge
B) Transferor
C) Transferee
D) Endorser
E) Endorsee

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E

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A) Mary is correct.
B) Mary is correct, but only because Annie signed the note, "Green," instead of "Greene," as such was on the note.
C) Mary is correct, but only because two payees are listed.
D) Mary is incorrect.
E) Mary is incorrect unless she can prove that Susie intentionally and purposefully spelled the name wrong to prevent negotiation.

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False

A) Yes, because she signed on the back with a blank unqualified endorsement.
B) Yes, because she signed on the back with a special qualified endorsement.
C) Yes, because she signed on the back regardless of the type of endorsement.
D) No, because she signed on the back using the words, "without recourse."
E) No, because the check was not properly delivered to Shifty.

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A) The person taking the instrument cannot become a holder in due course.
B) The alteration does not prevent a person taking the flawed instrument from becoming a holder in due course.
C) There is no effect so long as the payee can establish that he or she did not receive any more consideration than that to which the payee was entitled.
D) The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the holder in due course had knowledge that the payee had done the alteration.
E) The instrument is considered materially altered, but it only prevents transfer to a holder in due course if the transferee participated in the material alteration.

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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 Bob.
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.

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A) Blank
B) Allonge
C) Qualified
D) Special
E) Specific

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D

A) The law governing securities in Japan is technical with little ambiguity or arbitrary application.
B) The Japanese recognize the legal concept of yuka shoken, which means "valuable securities."
C) The Japanese have a single legislative act governing both commercial paper and investment securities.
D) The Japanese Commercial Code recognizes the term negotiable instruments.
E) Japanese law does not regulate investment securities.

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