Question 1

Nakamura,an accountant for Outdoor Outfitters,Inc.,issues company checks payable to nonexistent persons drawn on Outdoor's account at Peerless Bank.Nakamura indorses the checks and deposits them in his account.Outdoor discovers the theft and demands that Peerless recredit its account.Peerless's best defense is that​

Accepted Answer

Outdoor was in a better position than Peerless to prevent the theft because Nakamura was their employee and they had the ability to supervise and control his actions.

Question 2

Ada is the maker of a note,on which Bart is secondarily liable.Credit Instruments Company is the current holder of the note.Bart will be obligated to pay the note if​

Accepted Answer

Bart is secondarily liable on the note, which means his obligation to pay only arises if the primary obligor (Ada) defaults on the note. Therefore, if Ada defaults on the note, Bart will be obligated to pay it. None of the other options affect Bart's obligation to pay the note.

Question 3

Jackson pays Phil in good faith for a promissory note.Phil warrants that the draft has not been altered.This warranty is

Accepted Answer

The answer of Jackson pays Phil in good faith for...

Question 4

GR8 Products,Inc.,warrants its goods to be free of defects.If Heck is-sues an instrument to obtain goods from GR8 that prove defective,Heck can avoid paying on the instrument

Accepted Answer

The warranty provided by GR8 Products allows Heck to avoid paying on the instrument whether it is a check or a note. The fact that the instrument is defective means that the goods did not meet the warranty provided by GR8, thus Heck is not obligated to pay for them.

Question 5

Vera gives Willy a $500 check as payment for a debt.Willy crudely raises the amount of the check to $5,000 and transfers it to Xtreem Sportz store for a new bike.Xtreem deposits the check in its Yankee Bank account.Vera is liable for the payment of $5,000 to

Accepted Answer

The answer of Vera gives Willy a $500 check as...

Question 6

Owen is a holder of a promissory note obtained from Purchase Money,Inc.Regarding the defenses against payment of the note to which Purchase Money is subject,Owen,as an ordinary holder,is subject to

Accepted Answer

The answer of Owen is a holder of a promissory...

Question 7

Fact Pattern 24-1Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank.
-Refer to Fact Pattern 24-1.Niklas is

Accepted Answer

Niklas is secondarily liable because he negotiated the check by indorsement to O'Leary. As a result, he is only liable if O'Leary fails to pay, and the bank has exhausted all other options for payment.

Question 8

Fact Pattern 24-1Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank.
-Refer to Fact Pattern 24-1.If Prime Bank dishonors the check,O'Leary can obtain payment from Niklas

Accepted Answer

O'Leary can obtain payment from Niklas if they timely notify him of the dishonor of the check, as stated in the Uniform Commercial Code (UCC) Section 3-309. O'Leary's ability to obtain payment from Lisa or whether or not she overpaid her debt to Niklas is irrelevant in this situation.

Question 9

Jeff convinces Kraus,who does not understand English,to sign a $1,000 note that Kraus believes is an application for a credit card.Jeff negotiates the note to Loni.Kraus​

Accepted Answer

Kraus has a defense to payment on the note because he was fraudulently induced by Jeff to sign it. As a non-English speaker who believed he was signing an application for a credit card, Kraus did not have knowledge of the true nature of the note. Therefore, Loni cannot enforce payment against Kraus, even if Loni is a holder in due course (HDC).

Question 10

Rodeo Ranch's agent Slim is authorized to draw checks on Rodeo Ranch's account in Town Bank.Upper Range Corporation is a Rodeo Ranch supplier.Slim writes a check "pay to the order of Upper Range [signed] Slim," indorses the check in Upper Range's name,and deposits it in his account in Verity Bank.If Verity Bank collects payment,the ultimate party most likely to suffer the loss is​

Accepted Answer

Slim had no authority to indorse the check in Upper Range's name or deposit it in his own account. Therefore, Verity Bank would not be entitled to collect payment from Town Bank. Instead, the check would likely be returned to Town Bank as a forgery. Rodeo Ranch would suffer the loss as the account holder of the Town Bank account. Ultimate responsibility for unauthorized or fraudulent transactions generally rests with the account holder.

Question 11

Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie.The price of the shares is constantly fluctuating.Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase.Eppie agrees.Fund Investments buys the stock when the price is $4,000,but fills in the check for $5,000.The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services,which takes the check in good faith and without notice of Fund Investments' act.Hasty later learns that Fund Investments was not authorized to fill in the check for $1,000 over the price.Is Hasty an HDC? If so,for how much?​

Accepted Answer

The answer of Eppie gives a check to Fund Investments...

Question 12

Commercial Credit Company has in its possession an instrument dated May 1,2012.The instrument is payable to the order of Alpha Company "on June 1,2013," for $5,000.In the upper left corner is an address for Beta Corporation-10 Corporate Park Avenue,Chicago,Illinois-and in the lower right corner is the signature of "Delta,Inc.,By Eve,President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank,President,May 5,2012." On the back is the signature of "Alpha Company By Gail,President." Who,if anyone,is primarily liable on this instrument on May 1? On May 5? Who,if anyone,is secondarily liable on this instrument?​

Accepted Answer

The answer of Commercial Credit Company has in its possession...

Quiz 24: Transferability and Liability

Ada is the maker of a note,on which Bart is secondarily liable.Credit Instruments Company is the current holder of the note.Bart will be obligated to pay the note if​

Jackson pays Phil in good faith for a promissory note.Phil warrants that the draft has not been altered.This warranty is

GR8 Products,Inc.,warrants its goods to be free of defects.If Heck is-sues an instrument to obtain goods from GR8 that prove defective,Heck can avoid paying on the instrument

Vera gives Willy a $500 check as payment for a debt.Willy crudely raises the amount of the check to $5,000 and transfers it to Xtreem Sportz store for a new bike.Xtreem deposits the check in its Yankee Bank account.Vera is liable for the payment of $5,000 to

Owen is a holder of a promissory note obtained from Purchase Money,Inc.Regarding the defenses against payment of the note to which Purchase Money is subject,Owen,as an ordinary holder,is subject to

Fact Pattern 24-1Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank. -Refer to Fact Pattern 24-1.Niklas is

Fact Pattern 24-1Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank. -Refer to Fact Pattern 24-1.If Prime Bank dishonors the check,O'Leary can obtain payment from Niklas

Jeff convinces Kraus,who does not understand English,to sign a $1,000 note that Kraus believes is an application for a credit card.Jeff negotiates the note to Loni.Kraus​

Ada is the maker of a note,on which Bart is secondarily liable.Credit Instruments Company is the current holder of the note.Bart will be obligated to pay the note if

Jeff convinces Kraus,who does not understand English,to sign a $1,000 note that Kraus believes is an application for a credit card.Jeff negotiates the note to Loni.Kraus