Multiple choice questions related to basic
1.Which of the following is true about the good faith requirement for becoming a holder in due course?
a.It applies to both the transferor and the transferee of a negotiable instrument.
b.The UCC contains detailed requirements for meeting good faith.
c.It is an objective test applied using the reasonable person standard.
d.It means honesty in fact in the conduct of the transaction in question.
e.It is an objective test based on a reasonable person.
2.In order to become a holder in due course, one must take a negotiable instrument without notice of the following except:
a.That the instrument is overdue.
b.That the instrument has been dishonored.
c.That the instrument was signed by an agent.
d.That there was a claim to it by another person.
e.That there is a defense against it.
3. Can the payee of a negotiable instrument be a holder in due course?
a.Yes, the payee is always a holder in due course.
b.Yes, for notes but not for drafts.
c.No, not under any circumstances.
d.Usually not because the payee is usually aware of defenses or irregularities.
4. Under what doctrine could a party who is aware that an instrument is overdue take that instrument and acquire the rights of a holder in due course?
a.The shelter principle.
b.The indorsement protection doctrine.
c.The personal defense doctrine.
d.The public policy exception.
e.The taking for value doctrine.
5.What does it mean for liability on a negotiable instrument to be secondary liability?
a.The liability is for a small amount.
b.The liability arises only if the party with primary liability defaults and does not pay.
c.There are two parties to share the secondary liability.
d.It means that the liability relates to a two-party negotiable instrument.
6.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.
7.Against whom can the maker of a note successfully assert a personal defense?
a.The payee.
b.A holder in due course.
c.A holder who is not a holder in due course.
d.A and B only.
e.A and C only.
8. Billy, a minor, buys a car form Ajax Auto Dealers, signing a $2,000 negotiable installment note in payment. Ajax needs the cash, so it sells the note to Acme Finance Company, for its fair market value, indorsing the note in blank. The owner of Acme, who personally purchased the note, knew that Billy was a minor. Circumstances occur such that Acme can collect the note only if it is a holder in due course. Is Acme a holder in due course with respect to this note?
a.Yes, Acme is a holder in due course.
b.No, because the note was not properly negotiated to Acme.
c.No, because Acme did not take the note in good faith.
d.No, because Acme took the note with notice that there was a defense to its payment.
e.No, Acme is not a holder in due course because of some other reason.