10) There are three parties to a draft: a drawer, a drawee and a payee, and the draft must be written. True or false

11) Order paper is converted to bearer paper by a blank indorsement. true or false

12) To be a holder in due course, some of the requirements are that one must have accepted an instrument for value, in good faith and without notice of dishonor or defenses. true or false

13) Negotiation, in the context of negotiable instruments, is the transfer of possession of a negotiable instrument by one person to another person who can actually do something with the instrument, and that transferee is called a holder. true or false

14) If someone indorses a check by signing his or her name and adding the words "without recourse," that indorsement is known as a qualified indorsement. true or false

15) A post-dated check is a negotiable instrument. true or false

17) Real defenses, in the context of negotiable instruments, include

A) duress that makes the contract void.

B) illegality that makes the contract void.

C) discharge in bankruptcy.

D) all of the above.

18) Indorsers of a check incur liability on the check only if the check is presented for payment and it is dishonored, and they receive notice of the dishonor. If there is more than one indorser on that check, the indorsers are liable in reverse chronological order. true or false

19) A person who writes a check and who, by negligence, contributes to the material alteration of a check can be liable to a person who, in good faith, took the altered check and paid value for it based on the altered amount. true or false

20) An oral stop payment order is good

A) for six months even if no written stop payment order is filed.

B) for fourteen days.

C) forever.

D) for twelve months.

21) If an instrument is payable to a person and that person's name is misspelled, the instrument must be returned to the maker or the drawer for correction before being further negotiated. true or false

22) A blank indorsement specifies no particular person and the instrument becomes

A) bearer paper.

B) order paper.

C) a promissory note.

D) worthless.

23) A person who takes an instrument with a restrictive indorsement must pay or apply money given for the instrument consistently with the indorsement. true or false

24) An instrument in which a maker makes an unconditional promise in writing to pay to the order of another person or bearer a specific sum of money on demand or at a specific time is a

A) draft.

B) check.

C) promissory note.

D) certificate of deposit.

25) A bank is not liable to its customer if the bank fails to pay out on a check, even if the customer has the money in his or her account and there is no reason for the bank to refuse to pay the check. true or false

26) If an instrument is payable to the order of Jack and Jill, that instrument can only be negotiated

A) by Jack signing it.

B) by Jill signing it

C) by Jack and Jill both signing it.

D) by Jack and Jill both signing it and transferring it to a holder.

27) The effect of the Federal Trade Commission rule requiring certain language on a note or installment sale contract for a consumer transaction is to make a potential holder of the note or contract subject to all claims and defenses of the consumer. true or false

28) Presentment warranties concerning a draft (such as a check) include the following:

A) B, C and D.

B) The warrantor is a person entitled to enforce payment of the draft.

C) The draft has not been altered.

D) The warrantor has no knowledge that the signature of the drawer of the draft has not been authorized.

29) A personal defense means the instrument itself is invalid. true or false

30) Jack Jones is treasurer of XYZ Company. Jack, who is an authorized signer on the company's accounts and who generally handles the company's accounts, indorses a check, which was made payable to XYZ Company, the following way: "For Deposit Only, HFCU Acct # 12345. XYZ Company. Jack Jones." He deposits the check into the HFCU account. The check is dishonored and notice of dishonor is given to all signers on the instrument. HFCU can only look to XYZ Company, and not Jack, to recover payment. true or false

31) A holder who possesses a check used to pay for an illegal, void transaction is a holder in due course. true or false

32) Jack writes a check to Jill for $100.00. The drawee is Orange Bank and Trust. Jill indorses the check in blank and gives it to her brother, Bill. Bill indorses it and delivers it to the teller at Heritage Financial Credit Union with this indorsement: "For deposit only, Heritage Financial Credit Union account #1234." The check is

A) no longer a negotiable instrument.

B) a conditional promissory note.

C) indorsed with a restrictive indorsement.

D) indorsed with a qualified indorsement.

33) A holder in due course gets "better" rights than a mere assignee of a contract, because an assignee "steps in the shoes" of the assignor and may be subject to defenses against payment, but a holder in due course is not subject to personal defenses, claims to the instrument or claims in recoupment. true or false