22.

Mike signs a note payable to a bank. The bank indorses and negotiates the note to Fay, who then indorses and negotiates it to Sam. Sam presents the note to Mike, who dishonors it. Then Sam decides to pursue Fay and the bank on their secondary indorsers' liability. Against whom can Sam proceed?

A.

Fay.

B.

The bank.

C.	Both Fay and the bank.

D.	Neither Fay nor the bank.

23.

What form of liability exists when a party is only responsible to pay on a negotiable instrument in case of default of the party who shoulders the obligation of liability for the instrument?

A.	Primary Liability

B.	Secondary Liability

C.	Accidental Liability

D.	International Liability

24.

Which of the following is true regarding a drawee's liability on a check or a draft?

A.	The drawee is primarily liable in all cases.

B.	The drawee is secondarily liable because the holder must first proceed against the drawer.

C.	The drawee is primarily liable if it accepts (certifies) a check.

D.	The drawee is secondarily liable only in doubtful cases.

25.

Chin wants to buy a small parcel of land. The seller requires a certified check as payment. Chin has a checking account with ABC bank; he prepares a check for the seller and then has the bank certify it. He then presents the check to the seller. Who may now be liable for payment of the amount of the check?

A.	Chin only.

B.	ABC bank only.

C.	Both Chin and ABC bank.

D.	Neither Chin nor the ABC bank.

26.

The obligation of an acceptor is:

A.	to make an unconditional promise to pay a fixed amount of money and is responsible for making good on that promise.

B.	to pay the check according to its terms at the time he issued it.

C.	to pay the draft according to the terms at the time of its acceptance.

D.	to pay the amount due on the instrument according to its terms at the time he indorsed it.

27.

The drawee does not have liability on the instrument until it _____ the instrument.

A.

transfers

B.

signs

C.	negotiates

D.

makes

28.

Which of the following is true regarding an indorser's liability on a note?

A.	A holder can proceed directly against the indorser without first presenting the note to the maker.

B.	A qualified indorsement by the indorser will not disclaim liability against a holder who takes it in good faith and for value.

C.	For the indorser to be liable, there must be presentment to the maker, dishonor by the maker, and notice to the indorser.

D.	For the indorser to be liable, there need only be presentment to the maker and dishonor by the maker.

29.

Jack received a check as payment for the work he did. He indorsed the check "without recourse." What legal effect does this have?

A.	The drawer of the check is discharged from primary liability on the check.

B.	Jack is discharged from secondary liability on the check.

C.	The drawer of the check is discharged from secondary liability on the check.

D.	Jack is discharged from primary liability on the check.

30.

Salmond signs a note for the purpose of lending credit to John. Salmond also makes his father Richard sign the note because of his shaky financial condition. This indicates that Richard has signed the note in the capacity of a(n):

A.

drawer.

B.	accommodation party.

C.

drawee.

D.

indorser.

31.

Menzes is the Treasurer of ABC Corp. As such, he is authorized to sign checks for the corporation. A supplier bills ABC for a legitimate obligation. Menzes makes out a check to the supplier and signs it "ABC Corp., by Menzes, Treasurer." Who is liable on this check?

A.

ABC only.

B.	Menzes only.

C.	ABC and Menzes.

D.	Neither ABC nor Menzes.

32.

Maya Efrat, Chief Financial Officer for BAZ Inc., is authorized to sign checks for BAZ Inc. She signs a check "BAZ Inc. by Efrat, Chief Financial Officer." Which of the following statements is most accurate?

A.	Maya and not BAZ Inc. is liable on the check.

B.	BAZ Inc. and not Maya is liable on the check.

C.	Both BAZ Inc. and Maya are liable on the check.

D.	Neither BAZ Inc. nor Maya are liable on the check.

33.

National bank is reluctant to lend money to James and takes a note from him because of his shaky financial condition. However, the bank is willing to lend money to James if he signs the note and a friend also signs the note. Here the friend serves as the:

A.

deponent.

B.	accommodation party.

C.	fiduciary.

D.	non-joinder.

34.

If a person signs a check as an accommodation indorser:

A.	his contractual liability is that of an indorser.

B.	his contractual liability is limited to the payment of the principal.

C.	his contractual liability is more than that of an indorser.

D.	his contractual liability is limited to the payment of the interest.

35.

Mike authorizes his agent, Ben to borrow a sum of $10,000 on his behalf from the National Bank. Ben signs his name to a note without disclosing that the signature was on behalf of Mike. Who is liable on the note?

A.	Only Mike is liable.

B.	National Bank is liable.

C.	Both of them are liable.

D.	Only Ben is liable.

36.

A representative is personally liable to a holder in due course that took the instrument without notice that the representative was not intended to be liable if:

A.	the instrument identifies the represented person.

B.	the form of the signature does not show unambiguously that the signature was made in a representative capacity.

C.	the instrument categorically states that the representative would be liable even if the signature has been authorized.

D.	it is proved that the original parties did not intend her to be liable on the instrument.

37.

According to UCC section 3-401 which of the following does NOT constitute a valid signature of a negotiable instrument?

A.	A mark on the document

B.	A word on the document

C.	Leaving the document intentionally blank

D.	Printing the name on the document

38.

Tom steals Dave's checkbook, completes a check for $1,000, forges Dave's signature, and gets payment from Tom's bank. The bank paid in good faith. Who is liable to the bank for the $1,000 in this case?

A.

Tom

B.

Dave

C.	Both Tom and Dave

D.	Neither Tom nor Dave

39.

Usually, who may have the power to surrender the instrument if full payment is made?

A.

Indorser

B.	Accommodation maker

C.	Party to whom the holder presents the instrument

D.

Drawer

40.

If Jay signs Mila's name to a negotiable instrument without Mila's authorization or approval:

A.	the signature is not effective as the signature is of the unauthorized signer.

B.	the signature cannot be ratified later by the person represented.

C.	the signature does not bind the person whose name appears.

D.	Jay is not liable on the check.

41.

Which of the following is true regarding a transferor's liability on a transfer warranty?

A.	The warranties apply only when the transfer was accompanied by the transferor's indorsement.

B.	The transferor is liable only after presentment to the drawee or a primarily liable party, followed by that party's dishonor.

C.	It applies even when there was no consideration for the transfer.

D.	If the transfer was by indorsement, the warranty extends to all subsequent transferees, and not just the immediate transferee.

42.

All of the following constitute transfer warranties under Article 3 except:

A.	that all signatures on the instrument are authentic or authorized.

B.	that the instrument has not been altered.

C.	that the instrument is not subject to any defense or claim in recoupment.

D.	that the instrument is negotiable.

43.

Which of the following is both a transfer warranty and a presentment warranty? Assume that the instrument in question is a draft.

A.	That the draft has not been altered.

B.	That the draft is negotiable.

C.	That the draft is not subject to any defense or claim for recoupment.

D.	That the drawer is not insolvent.

44.

The transferor of which of the following instrument cannot disclaim transfer warranties?

A.

Check

B.	Promissory note

C.

Draft

D.

Invoice