Multiple choice

1) Dad has a negotiable instrument that he gives to his daughter as a birthday present. Dad is a holder in due course of that instrument. Circumstances arise such that the daughter can collect that instrument only if she has holder in due course status. Which of the following best describes this situation?

A. The shelter provision cannot apply to the daughter in this situation.

B. The daughter does not qualify as a holder in due course, but she can claim the holder in due course status of her father and collect the instrument.

C. The daughter is not a holder in due course, so she cannot collect on this instrument.

D. The daughter qualifies as a holder in due course, so she can collect on this instrument.

 

2) 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 taking for value doctrine.

B. The public policy exception.

C. The shelter principle.

D. The personal defense doctrine.

E. The indorsement protection doctrine

 

3) 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. No, Acme is not a holder in due course because of some other reason.

B. No, because Acme took the note with notice that there was a defense to its payment.

C. Yes, Acme is a holder in due course.

D. No, because Acme did not take the note in good faith.

E. No, because the note was not properly negotiated to Acme.

 

4) Marti issues a check payable to the order of John, who indorses the check in blank and transfers the check to Amy, who transfers the check to Bill without indorsement. Bill wishes to cash the check. Which of the following best describes the liabilities of the parties?

A. At this point, no one is primarily liable on the check and the drawee bank is not primarily liable on the check until it accepts the check.

B. The drawee bank is not primarily liable on the check until it accepts the check.

C. The drawee bank is primarily liable on the check.

D. At this point, no one is primarily liable on the check.

E. Marti is primarily liable on the check.

 

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