Multiple choice
1. Brenda wrote a check to KelliHGY for $50, to be drawn from her account at Beverly Bank. Beverly Bank refused to cash the check. Which one of the following correctly states Brenda’s liability in this situation?
A. Brenda is secondarily liable if she is given timely notice of the dishonor.
B. Brenda is primarily liable if she is given timely notice of the dishonor.
C. Brenda is secondarily liable regardless of any notice of the dishonor.
D. Brenda is primarily liable regardless of any notice of the dishonor.
2. Jayla and Jamal enter an agreement in which Jamal agrees to pay Jayla $500 over the next 3 months for a new stereo. Jamal calls Jayla on the phone and promises to pay her the entire $500 no later than 90 days from that date. This agreement fails to constitute a negotiable instrument, because negotiable instruments must
A. be payable on demand or at a definite time.
B. state an unconditional promise or order to pay.
C. state a fixed amount of money.
D. be in writing.
3. Liza purchased a car from Chad, and signed a promissory note in Chad’s favor promising to pay $1,000 for the car within 1 year. Despite Chad’s written and oral promises about the car’s condition. Liza had to have the car in the shop for repairs the entire first year. Liza refused to pay the balance due under the promissory note. Which one of the following is Liza’s best defense to avoid liability?
A. Illegality
B. Fraud in the inducement
C. Breach of warranty
D. Fraud in the execution
4. Lee offered Beth a promissory note signed by Joe in favor of Lee paying $10,000 in 6 months, in exchange for $1,000 cash. Beth readily accepted the deal. Beth may not be classified as a holder in due course because Beth
A. did not give value for the note.
B. did not take the note in good faith.
C. may have had notice of a defense against the note.
D. may have had notice that the note would be dishonored.