Question 1

One who __________ a negotiable instrument has not taken it for value and cannot meet the UCC's value criterion.
A) pays for
B) removes
C) finds
D) All of the choices are correct.

Accepted Answer

Finding a negotiable instrument does not involve a transaction where value is exchanged, unlike paying for it. Therefore, a finder cannot meet the Uniform Commercial Code's (UCC) criterion of having given value for the instrument.

Question 2

Article 3 of the UCC sets a higher bar in its __________ by requiring that a negotiable instrument be taken for value by the holder for a promise that has already been performed.
A) value exchange rule
B) demand rule
C) equal opportunity rule
D) gift promise rule

Accepted Answer

Article 3 of the UCC (Uniform Commercial Code) specifies the requirements for negotiable instruments, including the value exchange rule. This rule requires that for a negotiable instrument to be considered taken for value, the holder must have given something of value in exchange for it, typically in the form of a promise that has already been performed.

Question 3

Article 3 of the UCC provides a two-part definition that describes good faith as meaning:
A) honesty in law and the observance of reasonable standards
B) honesty in fact and the observance of specific commercial standards
C) honesty in fact and the observance of reasonable commercial standards
D) All of the choices are correct.

Accepted Answer

Article 3 of the UCC (Uniform Commercial Code) defines good faith as "honesty in fact and the observance of reasonable commercial standards of fair dealing." This definition emphasizes the importance of honesty and fairness in commercial transactions, focusing on both the factual honesty of the parties involved and their adherence to accepted commercial practices.

Question 4

Article 3 uses the word reasonable to indicate that we should use __________ standard when determining whether the holder was factually honest and acting in accordance with commercial standards:
A) an objective
B) a subjective
C) a fair
D) None of the choices are correct.

Accepted Answer

The term "reasonable" in this context suggests an objective standard, which means the determination of whether the holder was factually honest and acted in accordance with commercial standards is based on what a reasonable person would believe or do under similar circumstances, rather than the individual's subjective beliefs or intentions.

Question 5

In Banco Bilbao Vizcaya Argentaria v. Easy Luck Co., 208 So. 3d 1241 (Fla. Dist. Ct. App. 2017), the court held that a holder may be accorded HDC status it acts pursuant to:
A) good faith and reasonable commercial standards of fair dealing
B) good faith and specific commercial standards of fair dealing
C) fair faith and reasonable standards of best efforts dealing
D) fair faith and specific commercial standards of fair dealing

Accepted Answer

In the case, the court held that a holder may be accorded Holder in Due Course (HDC) status if it acts pursuant to good faith and reasonable commercial standards of fair dealing. This aligns with the general principles of the Uniform Commercial Code (UCC) regarding negotiable instruments.

Question 6

The __________ requirement is particularly important to obtaining HDC status because it separates innocent holders from those who know or should know that the negotiable instrument is defective or fraudulent in some way.
A) with notice
B) without notice
C) promise
D) future promise

Accepted Answer

The "without notice" requirement is crucial for obtaining Holder in Due Course (HDC) status, as it ensures that the holder was unaware of any defects or fraud associated with the negotiable instrument at the time of acquisition.

Question 7

__________ notice is not sufficient notice to the holder under Article 3.
A) Constructive
B) Simple
C) Future
D) All of the choices are correct.

Accepted Answer

Constructive notice is not considered sufficient notice to the holder under Article 3 of the Uniform Commercial Code, which deals with negotiable instruments.

Question 8

In Triffin v. Pomerantz Staffing Services, 851 A.2d 100 (N.J. Super. 2004), the court held that Friendly's (and Triffin's as its assignee):
A) met the "with notice" requirement
B) met the "without notice" requirement
C) failed to meet the "without notice" requirement
D) failed to meet the "with notice" requirement

Accepted Answer

The court held that Friendly's (and Triffin as its assignee) failed to meet the "without notice" requirement, meaning they did not provide timely notice to the drawer (the person who wrote the check) about the dishonored check, which is a necessary step to enforce the check under the New Jersey law applicable to the case.

Question 9

The __________ rule provides that the transferee of an instrument acquires the same rights that the transferor had.
A) parol evidence
B) shelter
C) maker
D) holder

Accepted Answer

The shelter rule states that the transferee of a negotiable instrument acquires the same rights as the transferor, essentially "taking shelter" in the transferor's rights. This means if the transferor had good title or rights to the instrument, those rights are passed on to the transferee.

Question 10

The UCC does not confer a __________ bar for parties asserting a defense against an HDC.
A) complete
B) partial
C) mediated
D) None of the choices are correct.

Accepted Answer

The UCC does not confer a complete bar for parties asserting a defense against a Holder in Due Course (HDC); certain defenses can still be raised.

Question 11

Article 3 of the UCC contains the following defense/(s):
A) real
B) personal
C) claims in recoupment
D) All of the choices are correct.

Accepted Answer

Article 3 of the Uniform Commercial Code (UCC) includes defenses of various types that can be raised against claims on negotiable instruments. These defenses include real defenses (such as forgery, fraud in the execution, minority of the signer, and illegality), personal defenses (such as breach of contract, fraud in the inducement, and unauthorized completion), and claims in recoupment (which relate to the right to reduce the amount owed on the instrument due to a related claim against the holder). Therefore, all of the choices listed are correct defenses under Article 3 of the UCC.

Question 12

Article 3 provides for real defenses that may be asserted by a third party. Which of the following is not a real defense?
A) fraud in essence
B) forgery
C) bankruptcy
D) lack of capacity

Accepted Answer

Lack of capacity is generally considered a personal defense, not a real defense, under Article 3 of the Uniform Commercial Code. Real defenses are those that can be used against any holder, including a holder in due course, and typically include fraud in essence, forgery, and bankruptcy.

Question 13

Article 3 provides for personal defenses that may be asserted by a third party. Which of the following is not a personal defense?
A) bankruptcy
B) infancy
C) lack or failure of consideration
D) All of the choices are correct.

Accepted Answer

Bankruptcy is not a personal defense that may be asserted by a third party.

Question 14

__________ is both a real defense and a personal defense.
A) A special indorsement
B) Fraud
C) Infancy
D) None of the choices are correct.

Accepted Answer

The answer of __________ is both a real defense and...

Question 15

__________ is an example of a claim in recoupment.
A) Restitution
B) Jail/prison time
C) Offset for breach of warranty
D) None of the choices are correct.

Accepted Answer

A claim in recoupment involves offsetting the original claim with a related counterclaim, and an offset for breach of warranty is an example of such a claim.

Question 16

Although not classified as a real or personal defense, HDCs also have immunity from __________.
A) non-restrictive indorsements
B) litigious parties
C) claims in fact
D) claims in recoupment

Accepted Answer

HDCs (Holders in Due Course) have immunity from claims in recoupment, which are defenses or claims that the original party to a negotiable instrument might have against the presenter of the instrument. This immunity allows HDCs to take the instrument free from these claims, enhancing the negotiability and reliability of such instruments in commerce.

Question 17

State courts and state legislatures began to create __________ protections based on common law and state law that outlined exceptions to the HDC rules.
A) non-restrictive
B) reasonable
C) consumer
D) restrictive

Accepted Answer

State courts and state legislatures created consumer protections based on common law and state law, outlining exceptions to the Holder in Due Course (HDC) rules to protect consumers from unfair practices.

Question 18

The __________ promoted a regulation that preserves a consumer's rights against an HDC when the transaction involves the consumer entering into credit contracts related to the sale of goods and services.
A) Department of Labor
B) Federal Trade Commission
C) Ministry of Contracts
D) None of the choices are correct.

Accepted Answer

The Federal Trade Commission (FTC) is responsible for protecting consumers and competition by preventing anticompetitive, deceptive, and unfair business practices. One aspect of its mandate includes regulations that protect consumers in credit transactions, ensuring their rights are preserved even when dealing with holders in due course (HDC).

Question 19

The Holder Rule __________ a consumer's rights against an HDC when the transaction involves the consumer entering into credit contracts related to the sale of goods and services.
A) frees
B) perpetuates
C) limits
D) preserves

Accepted Answer

The Holder Rule preserves a consumer's rights against a Holder in Due Course (HDC) in transactions involving credit contracts for the sale of goods and services, ensuring consumers can raise the same defenses against the holder that they could against the seller.

Question 20

Only transactions between a consumer and a __________ who is regularly engaged in the sale/lease of the products or service at issue are covered by the Holder Rule.
A) financier
B) merchant
C) seller
D) All of the choices are correct.

Accepted Answer

The Holder Rule only applies to transactions between a consumer and a merchant who is regularly engaged in the sale/lease of the products or service at issue.

Quiz 20: Negotiation, Endorsements, and Holder in Due Course

One who __________ a negotiable instrument has not taken it for value and cannot meet the UCC's value criterion.

Article 3 of the UCC sets a higher bar in its __________ by requiring that a negotiable instrument be taken for value by the holder for a promise that has already been performed.

Article 3 of the UCC provides a two-part definition that describes good faith as meaning:

Article 3 uses the word reasonable to indicate that we should use __________ standard when determining whether the holder was factually honest and acting in accordance with commercial standards:

In Banco Bilbao Vizcaya Argentaria v. Easy Luck Co., 208 So. 3d 1241 (Fla. Dist. Ct. App. 2017) , the court held that a holder may be accorded HDC status it acts pursuant to:

The __________ requirement is particularly important to obtaining HDC status because it separates innocent holders from those who know or should know that the negotiable instrument is defective or fraudulent in some way.

__________ notice is not sufficient notice to the holder under Article 3.

In Triffin v. Pomerantz Staffing Services, 851 A.2d 100 (N.J. Super. 2004) , the court held that Friendly's (and Triffin's as its assignee) :

The __________ rule provides that the transferee of an instrument acquires the same rights that the transferor had.

The UCC does not confer a __________ bar for parties asserting a defense against an HDC.

Article 3 of the UCC contains the following defense/(s) :

Article 3 provides for real defenses that may be asserted by a third party. Which of the following is not a real defense?

Article 3 provides for personal defenses that may be asserted by a third party. Which of the following is not a personal defense?

__________ is both a real defense and a personal defense.

__________ is an example of a claim in recoupment.

Although not classified as a real or personal defense, HDCs also have immunity from __________.

State courts and state legislatures began to create __________ protections based on common law and state law that outlined exceptions to the HDC rules.

The __________ promoted a regulation that preserves a consumer's rights against an HDC when the transaction involves the consumer entering into credit contracts related to the sale of goods and services.

The Holder Rule __________ a consumer's rights against an HDC when the transaction involves the consumer entering into credit contracts related to the sale of goods and services.

Only transactions between a consumer and a __________ who is regularly engaged in the sale/lease of the products or service at issue are covered by the Holder Rule.