The purpose of holder in due course status is to protect Multiple Choice all holders of commercial paper the federal and state governments financial intermediaries lenders and other financial institutions borrowers and other consumers 2 Hot Dress Doreen writes a check for a dress to Hot Dresses, Inc , a small specialty shop owned primarily by Betty Betty was getting ready to go on an extended European vacation and temporarily closed the shop the day after the dress sale to Doreen When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated therefore, she demanded that Doreen make the check good Which of the following parties is the holder of the check Multiple Choice Doreen Hot Dresses, Inc Doreen's bank Betty's bank The intermediary bank that will ultimately negotiate the check from Betty's bank to Doreen's bank 3 Which of the following is not a requirement for becoming a holder in due course Multiple Choice The party must be a holder of a complete and authentic negotiable instrument The holder must take the instrument for value The holder must take the instrument in good faith The holder must take the instrument without notice of defects The holder must either pay for the instrument or receive it as a gift 4 Bart received a check for his birthday as a present from his grandmother Bart is a(n) of the check Multiple Choice holder in due course assignor assignee drawer holder 5 In terms of the requirements for becoming a holder in due course, which requirement is related to, but more stringent than, consideration Multiple Choice For value In good faith Without notice of defects A complete and authentic instrument Negotiation 6 According to the shelter principle, even if a holder cannot attain holder in due course (HDC) status, the holder can acquire the rights and privileges of an HDC ifthe item is being transferred Multiple Choice from a holder in due course through electronic means and via interstate commerce within thirty (30) days of the original date of the instrument through a third party and via electronic means is in the amount of $10,000 or more 7 Zachary, who has been authorized to write a check from a company account to pay employees, draws bonus checks from the company account for five imaginary employees he then endorses the checks in their names and deposits the checks into his own bank account Which of the following is true regarding whether the company will be required to take the loss on the checks Multiple Choice Under the fictitious payee rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary Under the imposter rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary Under the transferor rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary Under the employee liability rule, the company will be able to recover from any bank that cashed the check in addition to Zachary Under the Banking Liability Enhancement Act of 2009, the company will be able to recover from any bank that cashed the check in addition to Zachary 8 Which of the following is not one of the ways an accommodation party may sign on an instrument Multiple Choice As a maker As an acceptor As a drawer As an endorser As a holder 9 Angry employee Martin is in charge of payroll and other expenses for ABC, Inc He becomes very angry with his boss Adam because Adam started dating Martin's girlfriend Stacy Martin decided to quit but not before he got some extra money from ABC, Inc Martin wrote five checks from the account of ABC, Inc to pay off the five credit card companies that Martin owed money The credit card companies took the checks without reason to be suspicious as to the source of payment The checks to the credit card companies in total amounted to $30,000, and each check was in an amount under $10,000 Martin also made out ten checks on the account of ABC to twenty alleged employees who did not really exist Each of these checks was in the amount of $5,000 Martin took the checks, endorsed and cashed the checks in the names of the various fake employees, and kept the cash Finally, Martin discovers through office gossip that Adam has been looking for another job with XYZ, Inc located in a neighboring state and that Adam is supposed to go there for an in person interview in a few weeks Martin sets up an interview with XYZ, Inc pretends to be Adam, and induces XYZ, Inc to give him, posing as Adam, a check for $5,000 as a signing bonus Martin immediately endorses the check pretending to be Adam and pockets the cash Finally, Martin leaves town heading for the Caribbean Is ABC, Inc entitled to a refund from its bank for the checks the bank paid written to fake employees Multiple Choice Yes, because Martin forged the names of the employees Yes, because Martin posed as an imposter with regard to the employees Yes, because the bank has a cause of action against Martin and can likely get a default judgment No, because of the imposter rule No, because of the fictitious payee rule 10 Hot Dress Doreen writes a check for a dress to Hot Dresses, Inc , a small specialty shop owned primarily by Betty Betty was getting ready to go on an extended European vacation and temporarily closed down the shop the day after the dress sale to Doreen When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated therefore, she demanded that Doreen make the check good As defined by the Uniform Commercial Code (UCC), which of the following actions constituted presentment Multiple Choice When Doreen issued the check to Hot Dresses, Inc When Betty took the check to ABC Bank When ABC Bank requested payment from XYZ Bank When XYZ Bank notified Betty that it would not pay due to insufficient funds When Betty requested that Doreen to make good on the check

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The purpose of holder-in-due-course status is to protect _____. Multiple Choice all holders of commercial paper the federal and state governments financial intermediaries lenders and

The purpose of holder-in-due-course status is to protect _____.

Multiple Choice

all holders of commercial paper
the federal and state governments
financial intermediaries
lenders and other financial institutions
borrowers and other consumers

2.Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. Which of the following parties is the holder of the check?

Multiple Choice

Doreen
Hot Dresses, Inc.
Doreen's bank
Betty's bank
The intermediary bank that will ultimately negotiate the check from Betty's bank to Doreen's bank

3.Which of the following is not a requirement for becoming a holder in due course?

Multiple Choice

The party must be a holder of a complete and authentic negotiable instrument.
The holder must take the instrument for value.
The holder must take the instrument in good faith.
The holder must take the instrument without notice of defects.
The holder must either pay for the instrument or receive it as a gift.

4.Bart received a check for his birthday as a present from his grandmother. Bart is a(n) _____ of the check.

Multiple Choice

holder in due course
assignor
assignee
drawer
holder

5.In terms of the requirements for becoming a holder in due course, which requirement is related to, but more stringent than, consideration?

Multiple Choice

For value
In good faith
Without notice of defects
A complete and authentic instrument
Negotiation

6.According to the shelter principle, even if a holder cannot attain holder-in-due-course (HDC) status, the holder can acquire the rights and privileges of an HDC ifthe item is being transferred _____.

Multiple Choice

from a holder-in-due-course
through electronic means and via interstate commerce
within thirty (30) days of the original date of the instrument
through a third party and via electronic means
is in the amount of $10,000 or more

7.Zachary, who has been authorized to write a check from a company account to pay employees, draws bonus checks from the company account for five imaginary employees; he then endorses the checks in their names and deposits the checks into his own bank account. Which of the following is true regarding whether the company will be required to take the loss on the checks?

Multiple Choice

Under the fictitious payee rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
Under the imposter rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
Under the transferor rule, the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
Under the employee-liability rule, the company will be able to recover from any bank that cashed the check in addition to Zachary.
Under the Banking Liability Enhancement Act of 2009, the company will be able to recover from any bank that cashed the check in addition to Zachary.

8.Which of the following is not one of the ways an accommodation party may sign on an instrument?

Multiple Choice

As a maker
As an acceptor
As a drawer
As an endorser
As a holder

9.Angry employee. Martin is in charge of payroll and other expenses for ABC, Inc. He becomes very angry with his boss Adam because Adam started dating Martin's girlfriend Stacy. Martin decided to quit but not before he got some extra money from ABC, Inc. Martin wrote five checks from the account of ABC, Inc. to pay off the five credit card companies that Martin owed money. The credit card companies took the checks without reason to be suspicious as to the source of payment. The checks to the credit card companies in total amounted to $30,000, and each check was in an amount under $10,000. Martin also made out ten checks on the account of ABC to twenty alleged employees who did not really exist. Each of these checks was in the amount of $5,000. Martin took the checks, endorsed and cashed the checks in the names of the various fake employees, and kept the cash. Finally, Martin discovers through office gossip that Adam has been looking for another job with XYZ, Inc. located in a neighboring state and that Adam is supposed to go there for an in-person interview in a few weeks. Martin sets up an interview with XYZ, Inc. pretends to be Adam, and induces XYZ, Inc. to give him, posing as Adam, a check for $5,000 as a signing bonus. Martin immediately endorses the check pretending to be Adam and pockets the cash. Finally, Martin leaves town heading for the Caribbean. Is ABC, Inc. entitled to a refund from its bank for the checks the bank paid written to fake employees?

Multiple Choice

Yes, because Martin forged the names of the employees
Yes, because Martin posed as an imposter with regard to the employees
Yes, because the bank has a cause of action against Martin and can likely get a default judgment
No, because of the imposter rule
No, because of the fictitious-payee rule

10.Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed down the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. As defined by the Uniform Commercial Code (UCC), which of the following actions constituted presentment?

Multiple Choice