Business law exam 4 – Flashcards with Answers

question

Duke signs a note “payable to the order of Equity Bank.” Unless Duke has a valid defense against payment, his liability on this note is
answer

b. primary
question

Rubin writes a check drawn on his account at Clearwater Bank and payable to the order of Gwyn. The bank does not pay the check. Rubin is
answer

b. liable to Gwyn for the amount of the check
question

Employment Personnel Company draws a check payable to Felix. Felix endorses the back and negotiates the check to Guaranty Bank. Primarily liable on the check is
answer

d. none of the choices
question

Fiona writes a check “pay to the order of Gerri” drawn on Fiona’s account at Home State Bank. Gerri presents the check for payment to Home State, which accepts it. Primarily liable on the check is
answer

c. home state
question

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
answer

a. ada defaults on the note
question

Orson signs a check “pay to the order of Painless Dental” drawn on Orson’s account in Quantum Bank. To impose liability on Orson if the bank dishonors the check, Painless Dental should present it for payment within
answer

d. thirty days
question

Gulf Bank receives a check drawn by Hayward. The check is received after the established “cutoff” hour. Payment can be postponed without dishonor
answer

d. until the following business day
question

Community Bank receives a check drawn by Dennis. The check lacks a proper endorsement. Payment can be postponed without dishonor
answer

d. until the proper endorsement is obtained
question

Dulcey agrees to cosign a promissory note for Excavation Equipment Leasing & Sales to buy a backhoe. The note is payable to Federal Bank. Dulcey is an accommodation
answer

c. maker
question

Olivia is Physicians Clinic agent and is not authorized to sign checks or notes on its behalf. Despite the lack of authority, Olivia issues a note “payable to the order of Quik Loan Company [signed] Physicians Clinic, by Olivia.” Liability on this note extends to
answer

b. olivia
question

Kurt writes a check on his account at Liquidity Bank to Mandy, a famous singer. The person claiming to be Mandy is an imposter, however, named Nila. Nila indoors the check to Outsize Portions, a casino, restaurant, an nightclub, for which Liquidity Bank cashes it. Ultimately, the loss will most likely fall on
answer

a. kurt
question

Jackson pays Phil in good faith for a promissory note. Phil warrants that the drafts not been altered. This is
answer

a. a presentment warranty
question

Ethel signs a note “payable to the order of Fidelity Bank.” Fidelity endorses the note in blank and negotiates it to Ghani, who sells it to Huck. Liability associated with the transfer of the note from Ghani to Huck is
answer

d. warranty
question

Puck signs a check “pay to the order of Quik Mart” drawn on Puck’s account in Regional Bank. Puck shows the check to Silky, who agrees that the signature is Puck’s and that Quik Mart is owed the amount that the check presents. Quik Mart signs the back of the check. Liability on this check extends to
answer

b. Puck and Quik Mart only
question

Toby signs a note “payable to the order of United Credit Union.” Unless Toby has a valid defense against payment, Toby’s liability on this note is
answer

a. immediate
question

Dirk is the maker of a note, on which Erv is secondarily liable. Friendly Credit Company is the current holder of the note. Erv will be obligated to pay the note if
answer

a. Dirk defaults on the note
question

Teri is
answer

c. secondarily liable
question

If Onyx Bank dishonors the check, Rosanna can obtain payment from Teri
answer

a. if Rosanna timely notifies Teri
question

To borrow the money to buy a car, Klaus signs a note “payable to the order of Lake City Auto Financing.” Minnie cosigns the note to guarantee the repayment of the loan. Minnie’s liability on this note is
answer

b. primary
question

Celia, an employee of Delite Dairy Company, forges the signature of Elin, Delite’s president, on a Delite check and cashes it at First Federal Bank. Eli would ratify Celia’s actions by
answer

c. entering into a repayment agreement with Celia
question

Birdie, an accountant for Country Custom Furniture, Inc., issues company checks payable to nonexistent persons drawn on Country’s account at Debit Bank. Birdie indoors the checks and deposits them in her account. Country discovers the theft and demands that Debit recredit its account. Debit’s best defense is that
answer

b. Country was in a better position than Debit to prevent the theft
question

Opaline asks Paolo, who does not understand English, to sign what Opaline says is an application to open a bank account. In fact, the “application” is a note. If sued on the note by an HDC
answer

b. Paolo’s best defense would be fraud in the execution
question

Dandy Lyin’ Furniture Store borrows $100,000 at 6% interest from Easy Loan Company and signs a promissory note for that amount. Easy changes the amount of the note to $120,000 and increases the rate to 8%. Easy materially altered the note when it changed
answer

b. the amount and the interest rate
question

Laptop Assembly Company gives a $3,000 promissory note to My-T-Fast Delivery Service to deliver a load of computer chips to Laptop’s plant. The chips are contaminated during transit, and are useless to Laptop on delivery. If My-T-Fast presents the note for payment
answer

a. Laptop’s best defense would be breach of warranty
question

To borrow money to finance the start-up of his business, Rollo executes an instrument in favor of Security Bank. For the instrument to be negotiable, the signature must be
answer

a. anywhere on the instrument
question

Northwest Energy Corporation signs an instrument that states it is being executed “as per contract for a purchase of 4,000 barrels of oil dated September1.” This instrument is
answer

a. negotiable
question

To obtain a business license, Bess writes a check to a certain state agency. Bess
answer

b. the drawer
question

Bart, the owner of Clear Cut Corporation, signs an instrument that includes the phrase “payment for this note will be made from the proceeds of next years timber sale.” This instrument is
answer

a. negotiable
question

Payday Loans, Inc., signs an instrument payable to the order of Qiana that states, “The maker of this note at the date of maturity, April 1, 2016, can extend the time of payment, but for no more than a reasonable time.” This instrument is
answer

c. nonnegotiable, because it is not payable within a definite time
question

Merry draws a check payable to “Cash” and presents it to National Bank for payment. This instrument is
answer

a. a bearer instrument
question

On April 1 Richard arranges to buy a sixteen-speed bike from his neighbor Phil for $500. Phil agrees to deliver the bike on May 1. Richard writes a draft for $500 payable to Phil on May 1. In this situation, the draft is
answer

b. a time draft
question

InterComp normally sells $50,000 worth of software to Power Source, a retail electronics store, each summer on terms requiring payment in sixty days. One year, InterComp wants cast, but Power Source wants the usual sixty days. To meet both needs, the parties can arrange
answer

c. a trade acceptance
question

Cricket signs a check payable to the order of Discount Warehouse, Inc., that does not include a date. This check is
answer

a. negotiable
question

The instrument that Thalia signs is most likely
answer

d. a promissory note
question

With respect to this instrument, Union Bank is
answer

d. the payee
question

Willy deposits $5,000 with Home State Bank on July 1, 2012. Home State Bank promises to repay Willy the $5,000 plus 3% annual interest on July 1, 2017. This is
answer

a. a certificate of deposit
question

This instrument is
answer

d. a trade acceptance
question

On this instrument, Commodity Sales is
answer

b. the drawer
question

To obtain office supplies for Doctors Medical Clinic, Elmo executes a draft in favor of Flynn. A draft is
answer

b. an UNconditional WRITTEN ORDER to pay money.
question

To finance the purchase of a car from Giant Auto Sales, Hoppy signs an instrument promising to pay to “Ideal Credit Union” $18,000 with interest in installments with the final payment due May 15, 2014. To be negotiable, this instrument must include on its face
answer

d. no conditions
question

To finance the purchase of a house from Tuna, Uri signs an instrument promising to pay to “Verity Mortgage Service” $160,000 with interest in installments with the final payment due July 10, 2042. To be negotiable, this instrument must include the signature of
answer

c. uri
question

Kelly signs an instrument in favor of Leo that states it is “subject to a certain agreement between Kelly and Mona.” This instrument is
answer

b. nonnegotiable, because it is made subject to a separate agreement
question

Rainey signs a promissory note for $10,000 in favor of State University (SU). The note is undated but specifies that it is “payable one month after date.” This note is
answer

d. nonnegotiable, because the maturity date cannot be determined from the face of the instrument
question

Hayley signs an instrument payable to the order of InstaCredit, Inc., that allows a holder to demand payment of the entire amount due, with interest, if Hayley fails to make a payment. This instrument is
answer

a. negotiable
question

Quincy draws a check payable to “Replay Stadium” to buy two season tickets to the next year’s State College football games. This instrument is
answer

b. an order instrument
question

Shad signs a promissory note payable to Theresa “with interest” on which he conspicuously notes that it is “nonnegotiable.” This instrument is
answer

b. nonnegotiable because it includes the notation “nonnegotiable”
question

Locke signs a check payable to the order of Metro Bank, filling in the blanks for the amount with the figures “$100” and “One thousand and 00/100 dollars.” This check is payable in the amount of
answer

c. $1,000
question

On May 1, Doug signs a check that is payable to the order of Employees Credit Corporation and that is dated July 1. This check is
answer

a. negotiable
question

On May 1, Doug signs a check that is payable to the order of Employees Credit Corporation and that is dated July 1. This check is
answer

a. negotiable
question

On May 1, Doug signs a check that is payable to the order of Employees Credit Corporation and that is dated July 1. This check is
answer

a. negotiable

Get instant access to
all materials

Become a Member